Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

KENDAL MARKET BILL [Lords]

Read the Third time and passed, with amendments.

TAMAR BRIDGE BILL

Read the Third time and passed.

Oral Answers to Questions — ORAL ANSWERS TO QUESTIONS

Mr. Speaker: Once more, I appeal for brief supplementary questions and answers.

SOCIAL SERVICES

Hospital Waiting Lists

Dr. Vaughan: asked the Secretary of State for Social Services how many patients are currently awaiting admission to National Health Service hospitals in Great Britain.

Mr. Forman: asked the Secretary of State for Social Services how many patients are currently awaiting admission to National Health Service hospitals in Great Britain.

The Minister of State, Department of Health and Social Security (Mr. Roland Moyle): Information in the form requested is not available as each country keeps statistics in a different form. The figure for England at 30th September 1977 was 591,096, for Scotland at 31st March 1977 53,974, and for Wales at 31st December 1977 35,143. In all cases, the latest available figure is given.

Dr. Vaughan: Has the Minister seen the article in The Sunday Times of 2nd July headed

Twenty heart patients die waiting for operations"?
Will he accept the offer of help from two Merseyside private hosptals to take in one heart case a week in order to reduce the waiting list? Will he also seek other offers of help from the private sector?

Mr. Moyle: I have seen the newspaper report. I have asked for a letter from the Liverpool area health authority. I shall consider the matter when I have received that letter. I do not take action on Press reports.

Mr. Forman: Is the Minister aware that as recently as the end of last month admissions to 36 hospitals were affected by industrial action? Does he agree that this does not help the Health Service at a time when it is already over-administered and under-financed?

Mr. Moyle: If the Health Service is over-administered, it is because the hon. Member for Carshalton (Mr. Forman) and his hon. Friends ensured that it would be over-administered. If the Health Service is under-financed, it is more financed than it would be if the hon. Member and his hon. Friends were in office.

Mr. Kilroy-Silk: Is my right hon. Friend aware that many people are waiting for heart operations in Liverpool and that the facilities and resources there are nowhere near sufficient to meet the demand in the north-west as a whole? Is he aware that patients have died while they have been on the waiting list—not 20, as reported, but 10? Is he further aware that this is not a new development? Does he agree that it is scandalous when a regional health authority has to be rescued by a private, parasitic medical service? Will he now give a clear and specific assurance that no further patients will die in Merseyside while they are waiting for heart operations and that he will provide the necessary resources?

Mr. Moyle: I am waiting for a report from the Liverpool area health authority. None of the alleged deaths was reported at the time that it occurred. I am aware that the north-west of the country is under-funded compared with the national average, although that is not necessarily so in the Merseyside area. I am aware of the concern in Liverpool. I shall pay


attention to the problem and let my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) have an answer after I have considered the problem in detail.

Mr. Boscawen: Is the Minister aware that since 26th June there have been no routine orthopaedic admissions to the Royal United Hospital in Bath? Is he aware that 1,500 cases are on the waiting list at that hospital? Does he know that a constituent of mine has been waiting for 18 months in great pain and has been told that the delay is due to a shortage of nurses? Is the Minister further aware that there has been a drastic cut-back in the recruiting of orthopaedic nurses to that hospital in the past few years?

Mr. Moyle: The hon. Member has not previously drawn my attention to the problems that he has just mentioned. I shall certainly look into the problem now that he has raised the matter. I am not complacent. There is a serious problem involving orthopaedic admissions nationwide. That is because there has been tremendous progress in medical techniques in the past few years. That has been accompanied by an increase in the number of referrals. It takes at least 15 years to train a consultant to perform these operations, and there is bound to be a gap between promise and achievement.

Mr. Grocott: Does my right hon. Friend agree that it is not just a question of the absolute numbers awaiting admission to hospital but a question of the discrepancies between hospitals which are often not far apart? What steps is he taking to ensure that general practitioners and patients are informed about hospital waiting lists so that they choose the hospital with the shortest list, even if it is further from their home?

Mr. Moyle: I agree with what my hon. Friend says about waiting lists. The management of waiting lists is one of the problems. The National Health Service has not been good at that in the past. We are ensuring that all general practitioners are circulated with waiting lists for particular specialties at all the hospitals in their areas. They might then break past habits and refer patients to the place where they are likely to receive rapid treatment instead of following the past pattern of selecting a favourite consultant and referring patients to him, irrespective of the length of the waiting list.

Mobility Allowance

Mr. Newton: asked the Secretary of State for Social Services what plans he has to extend the coverage of the mobility allowance.

The Under-Secretary of State for Health and Social Security (Mr. Alfred Morris): In reviewing their public expenditure programme, the Government keep constantly in mind all claims for extending the scope of this important new allowance. As the hon. Gentleman will appreciate, every claim for improvement in the scheme must be weighed both against other proposals for adding to the Government's present level of help for disabled people and all other proposals for increases in public expenditure.

Mr. Newton: Does the Minister recall that less than a year ago he was writing that it would be neither consistent nor fair to let people keep the trike beyond the age limit set for the mobility allowance? Now that he has changed his mind on the trike, surely there is an unanswerable case for him to change his mind on the mobility allowance as well and let people keep it beyond retirement age.

Mr. Morris: Right hon. and hon. Members on both sides of the House have welcomed my recent decision about invalid tricycles. We are very mindful of the strong pressures to continue the mobility allowance beyond retirement age. The resurce implications of such a move are very serious. We shall build on what we have achieved so far, as soon as we can. The hon. Member should bear in mind that we are in process of quintupling public expenditure on outdoor mobility for the disabled.

Mr. Carter-Jones: I congratulate my hon. Friend on his tremendous efforts to improve mobility, and in view of the hon. Gentleman's observations on aid for the elderly will my hon. Friend do two things? Will he persuade local authorities to improve their schemes of free travel for the elderly? Will he do his best to improve access to buses and trains, which sometimes causes immense problems in mobility?

Mr. Morris: I am very active in reminding public transport operators of the importance of providing access for disabled people. I am sure that local author-


ities will note with care my hon. Friend's first point. They have powers under section 2 of the Chronically Sick and Disabled Persons Act to assist disabled people in getting to and from facilities provided outside the home. Both points are very important, and I am certain that those who can help have noted that carefully.

Mr. Haselhurst: Not all the points raised about the mobility allowance are meant to decry the benefit of what has already been achieved. However, will the hon. Gentleman consider the case of people who are able to walk but who are not necessarily mobile and who would benefit very greatly from some small help they might get which fell short of the present level of mobility allowance? That would enable these people to be independent, which is what they are striving most to be.

Mr. Morris: This is a very important point. It shows that there is pressure from more than one direction for increassing public expenditure in this area. Blind people argue very strongly that they should receive outdoor mobility help under this scheme. People suffering from epilepsy and agoraphobia feel strongly that they should receive outdoor mobility y help. There is much more to be done in this area. We shall move forward as quickly as resources will allow. I hope, however, that no one will underestimate what has been achieved in very difficult circumstances.

Miss Maynard: Will my hon. Friend consider extending the coverage of the mobility allowance to blind people who, although able to walk, incur many expenses that sighted people do not? They often have to pay for home decorating, and often they have to have taxis when other people could use public transport. Frequently they have to pay for a gardener. I think that the mobility allowance should be extended to that.

Mr. Morris: I shall keep very much in mind what my hon. Friend said. I hope shortly to be greeting the national organisations which represent blind people. I have no doubt that they will be echoing the point that my hon. Friend has made. We shall improve the present scheme as soon as resources allow.

Hazel Road Health Centre, Knottingley

Dr. Edmund Marshall: asked the Secretary of State for the Social Services what is the present position in respect of ministerial consideration of the unused facilities at the health centre in Hazel Road, Knottingley.

Mr. Moyle: I will be writing to my hon. Friend shortly about this matter. Knottingley is not classified as a designated area requiring additional doctors, nor am I aware of any failure to provide general medical services for patients living on the Warwick estate. Knottingley health clinic is being fully used for community health services, although a branch surgery could be accommodated if a general practitioner wished to practise from there. I have no power to direct general medical practitioners to practise in a particular locality.

Dr. Marshall: If a qualified doctor shows an interest in holding surgeries on these premises, which have not been used for that purpose in the 10 years since they were built, will my right hon. Friend encourage the Wakefield area health authority, which owns the building, to be flexible and generous in offering the doctors terms to practise there?

Mr. Moyle: I note my hon. Friend's interesting suggestion. I shall certainly consider what flexibility I can urge upon the Wakefield area health authority in the solution of these matters.

Consultants (Pay)

Mr. Pavitt: asked the Secretary of State for Social Services if he is satisfied that the advice given to him as a result of the ballot of consultants on the proposed new pay contract represents the real position, in the light of the evidence sent to him by the hon. Member for Brent, South; what representations he has received from the whole-time Consultants Association; and if he will make a statement.

The Minister for Social Security (Mr. Stanley Orme): After receiving a number of representations, including a letter from the chairman of the National Health Service Consultants Association, my right hon. Friend wrote to the British Medical


Association seeking an assurance that virtually full coverage of the doctors eligible to vote has been achieved. On the basis of the association's reply, I am satisfied that this was so.

Mr. Pavitt: Does my right hon. Friend accept that this proposed contract is not only about consultants' salaries but can affect the whole character of the National Health Service? As the whole-time consultants see it as a charter for private practice, will my right hon. Friend ensure that before the Government take any decision they will have either separate monitoring to satisfy the doubts of the whole-time consultants that the coverage has been complete or monitoring of whatever the BMA does in this connection?

Mr. Orme: Two-thirds of those eligible to vote did so. Of those voting, 70 per cent. were in favour of accepting the new proposals—subject to pricing—including just over 50 per cent. of all NHS contract-holders. The BMA has said that it may hold a second ballot when the new contract has been priced if it feels that the profession should again be consulted.

Mr. Marten: There is considerable anxiety among some consultants about the pension arrangements, which are a very complicated matter. Were these covered in the contract to which the Question refers?

Mr. Orme: No, they were not. I shall refer this point to my right hon. Friend the Secretary of State.

Dr. M. S. Miller: Is my right hon. Friend aware that the position that he describes does not apply exactly in respect of some whole-time consultants who feel that since some consultants are not members of the BMA they were not involved in the ballot? Would it not have been better for the ballot to have been conducted by the Department and not the BMA?

Mr. Orme: The ballot was conducted by the Electoral Reform Society on behalf of the BMA. Every step was taken to ensure that it was correctly conducted. Obviously, a minority did not get ballot papers, but I think that the fact that over 50 per cent. of the total membership voted in favour is an indication that the coverage was pretty thorough.

Mr. Patrick Jenkin: Will the right hon. Gentleman dissociate himself from the criticisms levelled at the contract by the hon. Member for Brent, South (Mr. Pavitt)? Is it not a fact that the Government have accepted the terms of the contract and that, now that the consultants have voted in favour of it, as soon as it is priced it will be implemented and the Government will operate it according to the terms of the contract?

Mr. Orme: There is the possibility of a further ballot after pricing, so a final decision has not yet been taken.

Foster-children (Boarding-out Allowance)

Mr. Andrew F. Bennett: asked the Secretary of State for Social Services if he will make a statement about progress in his talks with local authorities about boarding-out allowance for foster-children.

Mr. Moyle: I have little to add to the replies I gave to my hon. Friend on 11th April and to my hon. Friend the Member for Eton and Slough (Miss Lestor) on 27th June. I understand that detailed proposals are being prepared for consideration by the relevant committees of the local authority associations in the autumn.

Mr. Bennett: I thank my right hon. Friend for that reply. Does he not agree that his policy of trying to lead the local authorities gently along this path is not making much progress? Would it not be better for him to give them a good, sharp kick up the backside to persuade them to implement national minimum standards of support, including financial support, for foster-parents?

Mr. Moyle: I note that my hon. Friend is impatient. He has given a very strong lead in this matter and has made a considerable contribution. I have no power to direct local authorities. All I can do is to give them a lead, and I did that by accepting my hon. Friend's suggestion that the rates of boarding-out allowances should be published in Hansard.

Mrs. Knight: Has the Minister considered, within the context of these talks, an extra boarding-out allowance for children who are disabled or handicapped in any way?

Mr. Moyle: I note the hon. Lady's claim for extra public expenditure, which is contrary to the policy of her party.

Mr. Newens: Is the case of privately fostered children also being considered? Is my right hon. Friend aware that the foster-parents of such children, in the event of the natural parents defaulting on their payments, may be denied practically all assistance from public funds? I have an example of a child in my constituency who is being denied assistance in this way and who is not even being permitted to have free school meals.

Mr. Moyle: Fostering has not been regarded as part of this exercise, but if my hon. Friend will put down a Question on the subject I shall give him the information he seeks.

Mr. Hodgson: I welcome the news of the terms due in October. Is the Minister aware of the unease felt by many foster-parents, as evidenced by their trip to the House of Commons, about the inequalities in the regions? Will he take a positive attitude to ensure that there will be no further delays?

Mr. Moyle: The last time we discussed this subject, the hon. Member raised the question of fostering. It is outside the terms of the Question. If he will put down a Question about fostering, I shall endeavour to deal with it.

Accident and Emergency Services (Mid-Sussex)

Mr. Tim Renton: asked the Secretary of State for Social Services whether he is satisfied with the provision of accident and emergency services in Mid-Sussex; and whether the new nucleus hospital in Haywards Heath will include such services.

The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): The South-West Thames regional health authority considers that the accident and emergency unit at Crawley hospital should provide adequate service for the Cuckfield and Crawley health district, and the authority does not, therefore, propose to include an accident and emergency department in the first phase of the nucleus hospital planned for Haywards Heath.

Mr. Renton: Is the Minister aware that both the local community health council and the medical executive committee are unanimously opposed to the phasing out of accident and emergency services at Cuckfield hospital? Does he think that only one accident and emergency unit will be sufficient in a health district which will have a population of 400,000 by the mid-1980s and which will be growing rapidly due to the expansion of Gatwick airport? Will the Minister therefore seriously reconsider this decision?

Mr. Deakins: The health authorities concerned in the region are planning on the basis that Cuckfield hospital will cease to provide a full accident emergency department, but this will be subject to normal consultative procedures, so that the organisation to which the hon. Gentleman has referred will have an opportunity to make its point then. For the longer-term future, the regional health authority will be considering whether to include an accident and emergency department in later phases at Haywards Heath when it comes to decide on the functional content of further development in the light of population predictions at that time.

Fluoridation

Mr. David Mitchell: asked the Secretary of State for Social Services whether he remains satisfied with the consultation procedures of area health authorities in the light of the approval by the Hampshire area health authority, including the appointed members, of fluoridation of drinking water, though consultation indicated that the county council and 10 out of 12 district councils were opposed to the proposal.

Mr. Moyle: Yes, Sir. The decision to seek the introduction of fluoridation of water supplies rests with the area health authorities as part of their statutory responsibility for preventive health in their areas. I am satisfied that Hampshire area health authority—teaching—took its decision after adequate consultation and after consideration of the evidence on the safety and efficacy of fluoridation in preventing dental decay in the community.

Mr. David Mitchell: What is the point of providing for a democratic consultation process if when it produces a clear


and decisive result, the area health authority immediately goes totally in the opposite direction?

Mr. Moyle: Not only the views but also the reasons given for them have to be assessed, and also weight has to be given to those reasons. The Hampshire area health authority did this before taking its decision.

Mr. R. C. Mitchell: Is it not clear that there is no pressure at all from the people of Hampshire to have fluoride added to their drinking water? Who has the final decision in this matter? Is it the Secretary of State for Social Services, the Secretary of State for the Environment or the health authority? Who has the final decision?

Mr. Moyle: The area health authority has the final decision in these matters, although, of course, it has to operate through the local water authority. It is not true, as my hon. Friend says, that there is no desire for fluoridation in Hampshire. For example, the Winchester community health council carried out a survey of public opinion which showed a large body of support in favour of fluoridation. That was the only community health council in the area which carried out such a survey.

Mr. Adley: Whatever one's views on fluoridation—one recognises that children are perhaps less articulate at the age of 3 than are adults at the age of 60—is the Minister aware that the information given by my hon. Friend the Member for Basingstoke (Mr. Mitchell) is factually correct and that the confidence of the general public in any remaining democracy within the Health Service is shattered when there is apparently a total dereliction of duty in the consultation process by the area health authority?

Mr. Moyle: No, Sir. What the hon. Gentleman has to explain is that, although local councillors on local councils might be opposed to it, local councillors on area health authorities are in favour of it.

Mr. Madden: Is the Minister concerned that the procedure which we are discussing was set up in the National Health Service Reorganisation Act 1973, put through the House by the right hon.

Member for Leeds, North-East (Sir K. Joseph), and does he agree that these decisions would have been better taken by elected representatives in the House of Commons than by appointed members of area health authorities?

Mr. Moyle: That would have been a very useful suggestion if my hon. Friend had been a Member of the House in 1973 and been able to put it forward. Incidentally, it was not only the right hon. Member for Leeds, North-East (Sir K. Joseph) who put through that Act; it was the entire Conservative Government at the time.

Hospital Facilities (Hemel Hempstead)

Mr. Corbett: asked the Secretary of State for Social Services what proposals he has received for the maintenance and improvement of acute hospital facilities in Hemel Hempstead.

Mr. Moyle: Proposals for maintenance and minor improvements are the concern of health authorities and do not come to my Department for approval. Proposals for major improvement of acute hospital facilities would await a decision on the provision of acute hospital services for the north-west district of Hertfordshire by the health authorities before being submitted to my Department.

Mr. Corbett: Given that the chairman of the Conservative Party, Lord Thorneycroft, said in my constituency last Saturday that there was little hope of any incoming Conservative Government immediately making money available for a new hospital at Hemel Hempstead, can my right hon. Friend say exactly what the cash position is? Can he also confirm that we are talking about the development and maintenance of acute services in the area and not their destruction?

Mr. Moyle: I am appalled at the irresponsible remarks of Lord Thorneycroft. I have visited Hemel Hempstead and have no hesitation in saying that it needs decent hospital facilities to serve it. The Health Service will make capital money available for any reasonable solution to the hospital problems of the north-west Hertfordshire district and Hemel Hempstead in particular.

Dr. Vaughan: Does the Minister accept that there is great anxiety among people in Hemel Hempstead that their acute services are to be moved to St. Albans? This will cause great hardship for people who have to travel that distance, which is not easy.

Mr. Moyle: The acute anxiety which exists in Hemel Hempstead has been exacerbated by the intervention of Lord Thorneycroft. I urge the inhabitants of Hemel Hempstead to pay no attention whatever to Lord Thorneycroft, because if the Labour Party remains responsible for government Hemel Hempstead will have new hospital facilities, and money is available for them. The hon. Gentleman knows a lot more than I do about what is going on in Hemel Hempstead. He says—it is totally wrong—that the hospital facilities are to move to St. Albans.

Mobility and Attendance Allowances

Mr. Rooker: asked the Secretary of State for Social Services how many persons are in receipt of mobility allowance and attendance allowance in Birmingham and the West Midlands.

Mr. Alfred Morris: The latest information available for the West Midlands region, which includes Birmingham, is that 6,439 people are currently receiving the mobility allowance and 27,035 the attendance allowance.

Mr. Rooker: I thank my hon. Friend for that information, and I pay tribute to his work in bringing these figures up, but will he take it that even in the past few days I have had constituents coming to see me who have only just found out about the mobility allowance? Moreover, I have another constituent—I do not want other hon. Members to be in the same position—who has fought on for three years because she did not know about the attendance allowance, yet this constituent, Mrs. Simkins, was in touch with every statutory authority that one could think of and no one pointed it out to her, with the result that she lost three years' attendance allowance.

Mr. Morris: My hon. Friend raises an important matter. I am very anxious to increase the take-up of all the new benefits. The additional help which this Government have made available for the dis-

abled is wasted if people do not know of it and therefore do not claim. We have used press advertisements and press statements. We have been in touch with organisations of disabled people. The Attendance Allowance Board has been in touch with directors of social services and general practitioners. I shall do everything I possibly can to draw further attention to these new benefits, and I hope that every hon. Member on both sides of the House will do what he or she can to increase public knowledge of all that has been done for the disabled and of what is now available for them.

Mr. MacKay: Is the Minister aware that in my Birmingham constituency there are several mothers who have sons or daughters on kidney machines who are to lose their attendance allowance later this week? This is causing great hardship and distress. What will the Minister do to alleviate it?

Mr. Morris: The hon. Gentleman has no basis for the statement at the beginning of his supplementary question. There is a case now with the national insurance commissioner. We are not yet aware of the outcome of his consideration of that case, and we shall look with great interest at the outcome. It is the case of a constituent of my hon. Friend the Member for Derby, North (Mr. Whitehead). The hon. Gentleman can be well assured that we are giving anxious consideration to the matter and that we shall make a statement as soon as we know the outcome of the national insurance commissioner's consideration and decision.

Mr. Litterick: The House is well aware of the Minister's efforts to increase the take-up rate of these benefits, but has he read the document "Second-class Disabled", published by the Equal Rights for Disabled Women Campaign, which shows clearly and dramatically that there are many women who are receiving both mobility allowance and attendance allowance but who cannot get the invalidity allowance, not because they do not know that it exists but because of the way in which the Act has been drafted and is now being interpreted by my hon. Friend's civil servants throughout the country?

Mr. Morris: My hon. Friend is referring to the housewife's non-contributory


invalidity pension. As he says, there are disabled housewives who receive both the attendance allowance and the mobility allowance but who have not sustained their claims to the HNCIP. I must emphasise that decisions are taken by the independent adjudicating authorities. I have been told by women's organisations that there is a strong case for amending the law. There will be resource implications there. Any decision in a particular case is for the independent adjudicating bodies. I am glad that my hon. Friends make their point about resources. There is no case whatever for hon. Members to ask us to cut public expenditure and then ask for more and more for their own constituents.

Mrs. Chalker: Can the Minister explain why, in the case of the HNCIP, there are many more successful appeals after first refusal than in the case of any other benefit? Does it not strike him as an indication that there is something wrong in the way in which the benefit is first considered, and ought he not to look again at the rules about incapacity to do housework?

Mr. Morris: The hon. Lady will remember that I consulted hon. Members on both sides about the new benefit before it was introduced. It has been put to me that there is a case for looking carefully at the number of successful appeals that there have been. I shall take great interest now in all appeals and look at the claim form for this benefit to see whether there is any further action which I should take.

Departmental Efficiency

Mr. Adley: asked the Secretary of State for Social Services if he is satisfied with the overall efficiency of his Department; and what proposals he has for its improvement.

Mr. Orme: Yes, Sir; but we are constantly seeking to improve it and would welcome any constructive suggestions from the hon. Member.

Mr. Adley: I am most grateful for that. Has the Minister listened today to the points made by, for example, his hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) and my hon. Friend the Member for Wells (Mr. Boscawen) and been alarmed at the evidence of deteriora-

tion in the standard of the Health Service? If the Minister wants a suggestion from me, may I put one to him now? Will he take a stand against the militant trade unionism and the activities of COHSE and NUPE, which are simultaneously destroying confidence in the Health Service and reducing standards in it? Perhaps he would like to start by openly condemning the strike at the Charing Cross Hospital, where attempts are being made to deprive patients of food.

Mr. Orme: I was wrong to ask for any helpful suggestions from the hon. Gentleman. In fact, my right hon. Friend has been conducting detailed discussions with both the medical profession and the trade unions to reach an understanding within the Health Service which will be helpful to both patients and themselves. What the hon. Gentleman has said has given no help whatsoever to that.

Mr. Mike Thomas: Does my right hon. Friend believe that it contributes to the work and efficiency of his Department and the Health Service if multinational drug companies are still permitted to run bogus trials of their drugs in order to induce doctors to prescribe them for their patients? Is not this extremely wasteful of resources, and is it not high time that my right hon. Friend stepped in to stop it before British companies are forced to engage in the same practices?

Mr. Orme: I cannot comment on the specific point which my hon. Friend raises, but my right hon. Friend has paid particular attention to the drug industry and to the number of prescriptions issued by the medical profession. I shall certainly draw that matter to his attention.

Mr. Anthony Grant: May I take up the Minister's invitation and make a serious suggestion to him? Will he substantially improve the monitoring by his Department of expenditure by area health authorities, which is quite inadequate at present, and will he encourage greater use of private contractors for cleaning and ancillary services, thereby releasing a great deal of public money for such things as kidney machines and so forth?

Mr. Orme: On the latter point there is a Question later on the Order Paper, and I shall not be drawn now, though I appreciate what the hon. Gentleman was attempting to do. As for the first point,


there is close monitoring of public expenditure through the area health authorities. There is great difficulty in this field, and a lot of the problems lie at the door of the previous Conservative Government who implemented the reforms.

Mr. Moonman: Would it not make good management sense and also lead to good mental health care if the medium secure unit in the north-west, an area with which my right hon. Friend is associated, was opened? May we, therefore, have an assurance that either the Secretary of State or one of his ministerial colleagues will give consideration to the possibility of conciliation in this matter, which certainly should not conflict with NUPE?

Mr. Orme: I take that point. I have visited the unit to which my hon. Friend refers. We should certainly like to see that unit operating, and we are looking at means to try to achieve that end.

Mr. Patrick Jenkin: May I also make a constructive suggestion, turning the Minister's attention to the press department of the DHSS? Is he aware that the Department has in the past few days put out two releases of speeches by the Minister with responsibility for the disabled, of whom we are very fond, in which he has appeared to claim the credit for the introduction of the behind-the-ear hearing aid, which was introduced by the last Conservative Government, and has claimed the credit for the exemption from vehicle excise duty, which was forced on him by the Opposition?

Mr. Orme: The last matter was not forced on my hon. Friend by the Opposition. It is this Government who will implement the vehicle excise duty exemption. The right hon. Gentleman knows that. On the first point, my hon. Friend the Minister was drawing attention to the fact that we passed the half-million mark in hearing aids, which I regard as very creditable.

Elderly Persons (Consultative Document)

Mr. Arthur Latham: asked the Secretary of State for Social Services what timetable has been suggested to voluntary organisations and others for their response to the consultative document on the elderly.

Mr. Orme: We have asked for comments by the end of October 1978. This is so that we can press on with preparation of a White Paper, which we plan to publish next year. But we are prepared to be flexible if any organisation has particular difficulty in meeting this deadline.

Mr. Latham: I congratulate my right hon. Friend on the issue of the consultative document, but does he agree that in any consultation about the problems of the elderly the most important people to consult are the elderly themselves? Is it not a bit daft that the document should cost 95p a time, and could my right hon. Friend make arrangements for those of the 8 million pensioners who want to know what may be proposed for them to obtain copies without charge? Further, does my right hon. Friend accept that, although within 20 years poverty in old age may be abolished, there is need to divert resources with urgent priority to the present generaton of pensioners who will never benefit from those long-term proposals?

Mr. Orme: On the second point, my hon. Friend will be aware of the measures which the Government have taken even this year to improve the lot of the pensioner and of what has been done over the past few years, for which, I think, the Government can take great credit. As for distribution, the Government have taken steps to see that these documents are available free of charge in centres which old people attend. We distributed many to leading organisations representing retired people, and we hope that that will meet the need.

Mr. Bowden: Does the right hon. Gentleman accept that the use of the phrase "tomorrow's pensioners" in the consultative document is very misleading, because that is 20 years ahead? It is today's pensioners who matter. Is it not a fact that this coming winter millions of today's pensioners will have to choose between keeping warm and having sufficient to eat?

Mr. Orme: When we put the uprating order through the House only recently, that meant that in the past four years this Government have increased pensions in real terms by over 21 per cent.—the largest increase for pensioners in modern times—along with heating allowances and


other provisions. Of course more needs to be done, but we need more public expenditure for it. Perhaps the hon. Member will pay some attention to that.

Drugs (Hospital Use)

Mrs. Knight: asked the Secretary of State for Social Services what progress has been made in the campaign to reduce wastage of drugs in hospitals.

Mr. Moyle: Many hospitals have now established drugs and therapueutics committees whose tasks include the more economic use of drugs. Representatives of these committees met recently to discuss how best to fulfil these functions. The announcement on prescribing which the chairman of council of the BMA and my right hon. Friend issued jointly in April should have stimulated all doctors to seek ways of applying its principles to their particular fields of practice.

Mrs. Knight: Is it not a fact that the amount of money spent on drugs in the Health Service is still rising steeply and that the most recently available figure is £87 million per annum? Is the right hon. Gentleman expecting that, as a result of the measures which he has just mentioned, that figure will be cut as substantially as those working in the NHS say that it could be?

Mr. Moyle: I will have to have notice in order to give the hon. Lady the exact figure, but certainly the expenditure on drugs in the Health Service is higher than we should like. We expect that the measures announced will lead to economies.

Mr. Pavitt: Why did my right hon. Friend reject the advice in the drugs therapeutic bulletin that I sent him, which would not only have saved wastage on drugs but would probably have cut the excess profits of drug companies by about £50 million to £60 million?

Mr. Moyle: I would draw my hon. Friend's attention to the fact that the pharmaceutical price regulating scheme mechanism limits the profits which companies can make on drugs.

European Community (Reciprocal Health Services)

Mr. Jessel: asked the Secretary of State for Social Services if he is satisfied with the provision of reciprocal health

services in EEC countries for the children of self-employed persons.

Mr. Deakins: We have consistently pressed for amending EEC regulations to provide this cover and they are at present under consideration within the Council of Ministers. Self-employed persons and their families are covered for immediate treatment, under bilateral agreements, when visiting Denmark and the Federal Republic of Germany.

Mr. Jessel: Is it not nonsense that the children of employed people are covered for medical treatment when travelling throughout the Common Market but that the children of the self-employed are not necessarily so covered? Why have not the Government done more to put right this ridiculous anomaly?

Mr. Deakins: The Government have done a great deal, but we have to operate within the framework of the Treaty of Rome, and at present the exising regulations in article 51 make it clear that they apply only to employed people. It is solely as a result of this Government's efforts in Brussels that we have got as far as we have in trying to cater for the needs of self-employed people and their families.

Mr. William Hamilton: Is my hon. Friend aware that while 14 Questions have been answered this afternoon I have made a careful count of the number of times that the Opposition have asked for increased expenditure and that the total is 10? Does he feel as sick as I do about the organised hypocrisy of a party which does that and at the same time votes for a reduction in public expenditure of £500 million?

Mr. Deakins: I entirely agree with my hon. Friend.

PRIME MINISTER (ENGAGEMENTS)

Mr. Shepherd: asked the Prime Minister if he will list his public engagements for Tuesday 11th July.

The Prime Minister (Mr. James Callaghan): In addition to my duties in this House, I shall be holding meetings with ministerial colleagues and others. This evening, I hope to have an audience of Her Majesty the Queen.

Mr. Shepherd: During the Prime Minister's undoubtedly busy day, will he pause to reflect that during the stewardship of this Labour Government consumer prices have risen by a staggering 91·1 per cent.—the worst of seven major OECD countries—and that food prices have risen by an enormous 99·8 per cent., the next but one to bottom in the same league table? Will he make abundantly clear to the people of this country the basis upon which the inflation figures that his Government will be putting out in the next few months are calculated, so that there can be no more misleading nonsense of the type of the Chancellor's 8·4 per cent. claim in October 1974?

The Prime Minister: I have explained to the House on many occasions, but I will continue to do so, that when the Government came into office we were faced with higher inflation than exists today. It was going up and would have continued to go up because of the indexing of wages which had been agreed under the previous Government. We have reversed that and the level of inflation is now lower than it was when we came to power. As for food prices, I wish that the hon. Member had been in the House when the previous Administration took us into the Common Market. Perhaps then he would have pressed upon his leader the necessity for negotiating a better deal than he got on the common agricultural policy.

Mr. Hayman: Will my right hon. Friend try to find a couple of hours this afternoon to pop up to Hatfield and hear how delighted the aircraft workers are at the Government's decision to go ahead with the HS146 and how determined they are to make the aeroplane a commercial success, for the benefit both of British Aerospace and of the country as a whole?

The Prime Minister: I know that my hon. Friend, in representing the aircraft workers, has made substantial representations on this matter to British Aerospace. It was British Aerospace's commercial decision, which it asked us to ratify, and we were very pleased to do so. It seems to me that there will be a good future for this plane. British Aerospace is being asked to make a commercial return on the substantial sums which are being invested. I am glad that it will

provide employment for several thousand people.

Mrs. Thatcher: Has the Prime Minister had time to consider today the latest evidence published yesterday on the people's attitude to further nationalisation? Is he aware that it showed that 80 per cent. of the people do not want any schemes of further nationalisation and that even the majority of those in the Labour Party take the same view? Why, then, do he and his party keep their commitments to extensive schemes of further nationalisation, both of whole industries and of major companies?

The Prime Minister: Yes, Sir, I always look at all polls in the newspapers—though I do not necessarily believe all their conclusions, the right hon. Lady will be relieved to hear. As for the particular poll to which the right hon. Lady refers, I am not unaware of the feelings expressed in this matter. That is why I believe that organisations such as the National Enterprise Board have a considerable role to play. I am very glad, because it will combine private and public enterprise and private and public funds. That is why I am glad to hear that the Conservative Party seems to be seeing sense now and, according to its latest document, or the latest speech, I understand, does not propose to abolish the NEB. That will come as a considerable relief to many hundreds of thousands of workers.

Mrs. Thatcher: As usual, the Prime Minister has inadvertently omitted to answer the question. Why do he and his party still stick to extensive commitments to further nationalisation of whole industries and of companies? Is his last reply the correct one—that for him nationalisation is never off the agenda?

The Prime Minister: When I gave the reply that nationalisation was never off the agenda, I was thinking of what the previous Government had to do in nationalising Rolls-Royce. When they are driven to nationalisation, it shows that even they must at times face the realities of the situation. We shall continue to do so as we face the problems of these industries, whether we handle them through the National Enterprise Beard or through public ownership. I dare say, if the Opposition ever came to power


again and were faced with another situation like Govan Shipbuilders or Rolls-Royce, that they would overcome their prejudices and nationalise once more, as they did last time.

Mr. Kilroy-Silk: asked the Prime Minister if he will list his official engagements for 11th July.

The Prime Minister: I refer my hon. Friend to the reply which I have just given to the hon. Member for Hereford (Mr. Shepherd).

Mr. Kilroy-Silk: Does my right hon. Friend accept that, although the Opposition seem to have nothing better to do than to stoop to personal abuse, he should instead give an assurance that he will concentrate upon policy and spend some time today outlining the Opposition's policy for increasing council house rents, increasing prescription, dental and optical charges, and imposing charges for people visiting the doctor and having to stay in hospital? The Leader of the Opposition's disgraceful suggestion—

Mr. Speaker: Order. I made it clear the other day that the Prime Minister—or any other Minister—cannot be questioned about statements made by those on the other side of the House but only about those things for which he is responsible.

The Prime Minister: I have noticed that the Opposition apparently will wish to keep public expenditure constant if they ever come to power. If that is so, in view of the large increase in the number of elderly people and the Opposition's proposals for additional defence expenditure, I do not see any escape from the alternative that they would have to charge very heavily for operations or for stays in hospital or for visits to the doctor. They must reconcile these things at some time.
As for personal attacks, I have noted what was said. I was reflecting on the Chancellor of the Exchequer's remarks last week, which I thought were a little unseemly. As regards the right hon. Member for Penrith and The Border (Mr. Whitelaw), it is not so much, when he attacks me, like being savaged by a dead sheep as being nuzzled by a friendly old sheepdog.

Mr. Watt: When the Prime Minister meets his Cabinet colleagues today, will he find time to discuss the many things that are happening in Britain's 200-mile economic zone? Is it not about time that he set up a ministry of marine affairs that will look after our fishing, our oil, our shipping and our mineral extraction? Is he aware that at present the Danes and the French are making away with our fish, the East Europeans are making away with our shipping, and the Germans, the Americans and the Italians are making away with our oil while we are nonstarters in the race for the extraction of minerals?

The Prime Minister: As the hon. Member knows, I have considered setting up a ministry of marine affairs. It does not seem that these functions, which are so different, would be best reconciled through such a ministry, although there is a Minister who co-ordinates all these matters. The fishing problem was raised at Bremen at the weekend and I said that we were looking for a just solution to this problem. The Chancellor of the Federal Republic said that he hoped to achieve a solution during the period of the German Presidency—that is, between now and the end of December.

Mr. Freud: asked the Prime Minister whether he will publish his official engagements for 11th July.

The Prime Minister: I refer the hon. Member to the reply which I gave earlier today to the hon. Member for Hereford (Mr. Shepherd).

Mr. Freud: Will the Prime Minister bear in mind that today is exactly six months since the east coast floods and five months since the Government announced the criteria for paying the victims? Is he aware that no one, whether domestic, industrial or agricultural, has received a penny of any compensation or relief? Will he now set up a national disaster fund, which he might administer himself, so that people can get flood damage relief instead of promises?

The Prime Minister: I regret to hear what the hon. Gentleman says about no payment of compcation. I will ask the Secretary of Statetor the Environment to look into it. understand that so far only four applications have been received from local authorities. It is not clear


why this should be so, and we are waiting to see whether there will be further claims or whether local authorities are not claiming because they do not expect the expenditure to exceed a penny rate.
We have considered the possibility of a national disaster fund, but on balance we think it is preferable that each case should be taken on its merits, and we shall continue to act in that way.

Mr. MacFarquhar: Has my right hon. Friend in his busy day managed to read the stories about Bremen by economics correspondents in The Times and The Guardian today, apparently based on Treasury briefing? Will he say whether his own attitude towards the Bremen results is as hostile as is apparently that of the Treasury mandarins?

The Prime Minister: I do not have to take any responsibility, thank goodness, for what appears in the press. I noticed there there was a change in attitude, but I think that on the whole they reinterpret what they themselves have said originally, rather than ascribing any difference in attitude to me.

SECRETARY OF STATE FOR EMPLOYMENT

Mr. Wyn Roberts: asked the Prime Minister if he will dismiss the Secretary of State for Employment.

The Prime Minister: No.

Mr. Wyn Roberts: It is a bit late in the day to make changes. Will the Prime Minister explain why every Conservative Government since the war have left office with more people employed than when they came in and why every Labour Government since the war, without exception, have left office with fewer people in employment than when they came in?

The Prime Minister: It is pretty generally understood that the level of unemployment is related to the world recession. That is why the Government have endeavoured to use measures that would help industry, through such devices as the temporary employment subsidy—against the wishes of the Opposition. It is also the case that there are more people in employment today, as distinct from more people unemployed, than there were in

1973. As to how we leave office, that will not be for a long time yet, so I do not think that the hon. Gentleman needs to worry. His memory is singularly short if he does not remember that when the last Conservative Government left office there was a three-day working week in operation.

Mr. Gwilym Roberts: Does my right hon. Friend accept that it is a reasonable statistical estimate that if all the proposals which the Opposition have supported in the House had been carried out there would be a million more people unemployed at present? Would he care to comment on that?

The Prime Minister: I certainly agree with my hon. Friend that if the policies advocated by the Opposition were put into effect there would be a substantial increase in unemployment. I do not think that they deny that.

Mr. Churchill: Rubbish.

The Prime Minister: It must be clear that the removal of grants and subsidies, which is the Opposition's policy, would lead to the collapse of a number of firms in the depths of the recession. Therefore, we believe that we should continue with these policies until the world economy picks up again.

Mr. Tim Renton: When the Prime Minister was in Bremen last week, did he notice the figures which showed that Germany's unemployment was at a four-year low in June? Does not that emphasise the tragic contrast between four years of private enterprise recovery from the oil crisis in Germany and four years of Socialist slump in Britain? Is it not because of that contrast that the German wolfhound bit the Prime Minister so hard last week?

The Prime Minister: On the contrary. It was not like a sheepdog but it was nearly as nice. Germany, like other countries, has suffered from an increase in unemployment to a considerable extent. There are now a number of countries, I regret to say, whose unemployment levels are higher than that of the United Kingdom.

Mr. Lawrence: Name them.

The Prime Minister: If the hon. Gentleman will table a Question, I will


give him an answer. [HON. MEMBERS: "Oh."] It is no use hon. Gentlemen shouting "Oh". Everyone knows that this is true. There are, I am glad to say, other countries which we must try to emulate. What is certainly true is that this Government, through their measures to contain unemployment, have done much better than a number of other countries. I shudder to think what would happen if the Opposition came back to power and reversed those policies.

Mr. Radice: While I agree that the unemployment figures are far too high, particularly in the northern region, may I ask my right hon. Friend whether he agrees that today's inflation figures are extremely encouraging, not only in terms of what happens to inflation this year and next year but in terms of what happens to unemployment this year and next year?

The Prime Minister: It is true that the wholesale price figures published yesterday show that there is likely to be a considerable steadiness in the inflation rate between now and the end of the year, which is as far ahead as I have always wanted to prophesy because so much depends on the next wage round. [Interruption.] Hon. Members opposite need not affect any surprise about this. So much depends on what happens in the next wage round and upon matters such as the strength of sterling, which is pretty stable at the moment, and similar issues. The lower the rate of inflation—this is what I have said 150 times and will say another 150 times—the more prospects we have of more competitive jobs and, therefore, of more employment.

STATUTORY INSTRUMENTS, &c.

Mr. Speaker: By leave of the House, and only by leave of the House, I will put together the Questions on the four motions relating to Statutory Instruments.

Ordered,
That the Building (First Amendment) Regulations 1978 (S.I., 1978, No. 723) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the draft European Communities (Definition of Treaties) (No. 5) (Joint European Torus) Order 1978 be referred to a Standing Committee on Statutory Instruments, &amp;c.

That the draft European Communities (Privileges of the Joint European Torus) Order 1978 be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the draft Weights and Measures Act 1963 (Various Goods) (Termination of Imperial Quantities) Order 1978 be referred to a Standing Committee on Statutory Instruments, &amp;c. —[Mr. Foot.]

CORONERS (AMENDMENT)

3.31 p.m.

Mr. Dafydd Wigley: I beg to move—[Interruption.]

Mr. Speaker: Order. Will the hon. Member wait just one moment? It appears that some hon. Members have other engagements.

Mr. Wigley: I beg to move,
That leave be given to bring in a Bill to amend the Coroners (Amendment) Act 1926, with reference to the power of removal of a body for post-mortem examination.
Last Friday at Llanberis in my constituency there was a demonstration, when 500 people walked 300 yards in a protest march. The House may not think that 300 yards is a very great distance for them to walk, but in this case the procession had to stop twice in that distance for the marchers to get their breath. These were the former slate quarry men of Gwynedd, suffering from pneumoconiosis, and the widows of those who died from this disease. This is the group of people for whom the Bill is very relevant.
There are hon. Members who represent coal mining constituencies or other areas where pneumoconiosis, silicosis and associated lung diseases are endemic. They will be very familiar with the problem which I hope can be slightly alleviated by the passing of the proposed Bill. My knowledge of the problem arises from the prevalence of these diseases in my own constituency of Caernarvon as a result of the slate quarrying industry.
At the turn of the century this industry employed about 20,000 people in the Gwynedd area. By now it is employing only 400 people, but we still live under the shadows of the effects of that industry, with middle-aged men prematurely ageing as a result of the dust, old men struggling to live, and dying from it, and widows—who gave many years of their lives, perhaps a decade or longer, to nursing their ailing husbands—now left with nothing


but the miserable pittance, if they are lucky, of the additional 55p a week on their pensions.
These are the people who, unlike the coal miners, do not receive the benefits of a State-funded compensation scheme and, because most of the quarries have gone bankrupt, they have no redress to tort action through the courts.
I say this by way of background, for a Bill introduced in this way is limited in the fields it can tackle, and my Bill deals with one small but traumatic area of suffering endured by such communities, and particularly by bereaved families.
The agony which I seek to reduce by the Bill is that caused by the almost inevitability of the body of a deceased person, who had suffered industrial dust diseases, being subject to a post mortem examination. We have the experience so often of a wife being told of her husband's death and, in almost the same breath, being informed that his body will be carved up in order to "identify the cause of death". It is pouring agony on to grief, and in many cases it must seriously be asked whether a post mortem examination is really necessary to confirm the cause of death of a person who may have been visibly dying from the effects of choking lungs for weeks and months, if not years.
I should like to quote from letters from my constituents. The first reads:
I want to draw to your attention the unfairness and insensitivity which relate to circumstances surrounding death from slate dust. This is the experience which I suffered. At 5 a.m. on Monday morning my father died in hospital from this disease, and within a short space of time I was asked to fill forms to concur to a post mortem examination. After returning home, and pondering over the matter, I recalled that the doctor had told me that a post mortem would be held, and that we had no choice in the matter; why, then, were we given these forms at a time that was so painful to us? Subsequently, the same day, a police officer came to our house for my mother to make a statement for him to take to the post mortem. The question seemed to be totally irrelevant to the inquiry; namely, how many years we had lived in the house, what insurance policies my father had, where he had been working, and many irrelevant questions. I put no blame on the policeman who was sent to ask these questions of us at such a difficult time. But can nothing be done to bring in a little sympathy for the position of a bereaved family?
Another constituent, referring to a relative of his, writes as follows:

In 1964, he was told that he was suffering from pneumoconiosis, and was assessed at 20 per cent. disability. By 1973, he was 100 per cent. In 1974, he was confined to sitting in his corner, suffering severely from shortage of breath. He deteriorated rapidly, becoming no more than a shadow of his former self. He could not go to bed, and slept in his chair, when he could sleep, but was awake most of the night, fighting for breath. He died in December 1976. The local doctor, who treated him, said that he could not give a death certificate, because he was not allowed to put silicosis as the only cause of death. I he family were informed that a post mortem would be required. This was vociferously contested, but a policeman came to the home and announced that the coroner had directed that the body had to be taken away for a post mortem examination.
Another letter, not from a constituent, refers to the death of the writer's father in an area of Wales where pneumoconiosis was prevalent from the silica quarries. He writes:
The cause of death was plainly obvious to everyone, and the GP had practically predicted the date and the way it would occur…. I later pursued the matter in a half-hearted sort of way and got the astounding explanation that the request for a PM had been a 'routine' one with the object of compiling statistical information. Medical science should not be unnecessarily impeded. But neither should distressed families be further pained without good reason.
It is the objective of the Bill to allow the next of kin of the deceased person to object, on grounds of conscience or of religious belief, to a postmortem examination being undertaken where the medical practitioner of the deceased is confident that he knows the cause of death. To secure this provision, the Coroners (Amendment) Act 1926 needs to be amended.
We have to go back, however, to the Coroners Act 1887 to establish the background to present requirements. That Act stipulates a general duty on coroners to hold an inquest where the person has died an "unnatural death". Death from an industrial disease is regarded as an unnatural death. The Coroners (Amendment) Act 1926 provided that a coroner could require a post-mortem examination to be carried out on a dead body if he had reason to believe that the examination might prove that an inquest might be necessary.
The Broderick committee on death certification and coroners summed up the position in law as follows:
A coroner is required to consider in every case whether a death which seems likely to


have been caused by a prescribed industrial disease is, or is not, unnatural. In practice coroners invariably have the results of a postmortem examination to assist them in this consideration.
I should perhaps at this point remind the House that it is not necessarily the cause of death found by a coroner which decides the question of entitlement to industrial death benefit. The Industrial Injuries Acts laid down an entirely separate procedure for deciding whether death was the result of an industrial disease or accident. Members will be aware of this from their own experience of the dismay that has been caused to widows when the coroner has attributed death to pneumoconiosis, but following the pneumoconiosis medical panel report, the insurance officer has decided otherwise.
It could have been argued until last year, however, that a post-mortem examination would have been necessary for the purposes of paying benefits, even if it had not been necessary under the Coroners Acts. However, the situation has changed somewhat since the passing of the Social Security (Miscellaneous Provisions) Act 1977, which, in section 9, provides that where a disablement pensioner with an assessment of 50 per cent. or more for pneumoconiosis or byssinosis dies as a result of any pulmonary disease, his death is automatically treated as due to industrial disease.
Many people have argued that 50 per cent. is too high a threshold at which to pitch this most sensible innovation, and in clause 2 of my Bill I provide for the reduction of this threshold from 50 per cent. to 30 per cent.
The overall effect of my proposed Bill is therefore as follows. When a medical practitioner notifies the coroner of a death, he will also, where appropriate, indicate that he is satisfied that he knows the cause of death. In those circumstances, the coroner shall inform the next of kin of the deceased if he still wishes to hold a post-mortem examination, and the next of kin shall have a right, within 24 hours of receiving such notification, to object to the holding of the post mortem on grounds of religious belief or conscience. In practice I hope that this will lead to a situation where a post mortem will be asked for by the coroner only in a genuine case of uncertainty as to the cause of death.
I have no doubt that certain elements in the medical fraternity may object to this relaxation of the supply of bodies, and I acknowledge the needs of research. However, in all conscience, this House must agree that there must remain some sanctity and respect for a human body even after death, and that where the next of kin so desire, and where there is no good medical reason to the contrary, the wishes of the next of kin should be respected.
I acknowledge that the Broderick committtee recommended otherwise and envisaged an increase in the number of post mortems. However, as can be seen from paragraph 17·08 of its report, the reason was that the committee thought it helpful to determine claims for industrial death benefit. This is no longer so valid an argument after the 1977 Act, and would be even less so if the threshold were dropped to 30 per cent.
I have had numerous letters from constituents, and others, relating harrowing tales of anguish caused by this sloppy, callous and unnecessary law. In my office I have had widows in tears when recalling their experiences of bereavement compounded by horror. I have seen grown men cry because they knew that this would be their likely fate, and they also knew the grief that it would cause to their beloved ones.

Question put and agreed to.

Bill ordered to be brought in by Mr. Dafydd Wigley, Mr. Gwynfor Evans and Mr. D. E. Thomas.

CORONERS (AMENDMENT)

Mr. Dafydd Wigley accordingly presented a Bill to amend the Coroners (Amendment) Act 1926, with reference to the power of removal of a body for postmortem examination: And the same was read the First time; and ordered to be read a Second time upon Friday 21st July and to be printed. [Bill 171.]

BUSINESS OF THE HOUSE (FINANCE BILL)

Ordered,
That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill notwithstanding the practice of the House as to the intervals between the stages of Bills brought in upon Ways and Means Resolutions.—[Mr. Joel Barnett.]

WAYS AND MEANS

ADVANCE CORPORATION TAX (RATE FOR FINANCIAL YEAR 1978) (No. 2)

Resolved,
That in the Resolution of the House of I7th April (Advance corporation tax (rate for financial year 1978)) for the words 'thirty-four sixty-sixths' there shall be substituted the words 'thirty-three sixty-sevenths'.—[Mr. Joel Barnett.]

FINANCE BILL

As amended (in the Committee and in the Standing Committee), further considered.

3.45 p.m.

Mr. Speaker: I call Mr. Jerry Wiggin, on a point of order.

Dr. Alan Glyn: On a point of order, Mr. Speaker.

Mr. Speaker: I shall call the hon. Gentleman afterwards. This is a point of order as well.

Mr. Jerry Wiggin: Thank you, Mr. Speaker. May I raise with you a point of order, of which I have given you some intimation, concerning the selection of amendments for this Finance Bill both on Report and, indeed, in Committee upstairs? I appreciate that you are not personally responsible for that. I think that today's selection of amendments contains 33 Government amendments or amendments with Government amendments contained in the group, seven amendments containing the names of my right hon. Friends on the Conservative Front Bench and only 14 others from various Back Benchers on both sides of the House, of which a number are as a result of ties in Divisions upstairs, promises from Ministers or other special priorities, of which you are bound to take notice.
It would not be in order for me to raise with you the whys and wherefores of your selection, Mr. Speaker. Indeed, I understand that. But I hope that I may expand my argument slightly over and above that, because of the massive tax legislation which this country has had put upon it in the last 13 or more years. Indeed, it was pointed out to me that in the 13 years up to and including 1964, there were just under 900 pages of Finance Acts, averaging 69 a year. In the 13 years from—

Mr. Speaker: Order. Will the hon. Gentleman put his point of order to me? It is no good giving us history. I want a point of order with which I can deal.

Mr. Wiggin: All right, Mr. Speaker. I accept that you, and indeed the House,


fully understand the complexity of our tax legislation. But it is as a result of this complexity that Back Benchers find it impossible to get small points of tax law selected for debate during various stages of the Finance Bill. This is the point that I wish to put to you.
We all know that it is necessary for the usual channels to give advice to the Committee Chairmen and, respectfully, to you, as to those subjects which are of major interest to the Opposition. Of course, all Government amendments are selected automatically by you. The result of this advice is that small points of taxation, which may be immensely important to some people, are never open to debate in this House. Year after year it is quite impossible for amendments to this massive quantity of legislation—I shall not seek to make that point—to be debated.
I ask whether you would consider that this point should be referred to the Select Committee on Procedure. Although you may say to me that this point arises on any Bill—indeed, you have to use your discretion—because of the fact that the Finance Bill is an annual Bill, and because these wrongs are carried over from year to year, this is a special case. I would go further and suggest that there should be a special Select Committee on this matter, although I could not ask you to decide on that. The point is that minorities are not being heard and there is no available channel for these points to be put. Therefore, I put it to you, as a defender of minorities, that this is a point which you should consider.

Mr. Speaker: The hon. Gentleman gave me notice this morning that he would seek to raise this point. That is why I listened as carefully as I could to what he had to say. I am glad to note that he began by saying that he in no way challenged the selection that I made, because that would be out of order.
The selection of amendments is always a very difficult task for me. It would be much easier for me if I said that everything could be called—

Mr. Dennis Skinner: Hear, hear.

Mr. Speaker: But the House has given me the responsibility, apparently with the

support of the hon. Member for Bolsover (Mr. Skinner), of selecting the amendments. Although I know that I cannot please everyone, I do my best. The complaint which the hon. Gentleman has raised is one that has been raised ever since I have been in this House, and every one of my predecessors gave much the same reply as I am giving today. If the hon. Gentleman remains here as long as I have been here, he will hear that point raised many times in the future.

Dr. Glyn: Further to that point of order, Mr. Speaker. While completely accepting your judgment, I should like to reinforce what my hon. Friend has said. For instance, new clause no. 1 affects a large number of people, and to my knowledge it has been on the Amendment Paper on almost every Finance Bill, although it has never been called. In fact this amendment affects all those people who travel to work and who spend over £100 a year in travel expense. Yet under the present arrangements Back Benchers seem to have no chance of debating these points on the Floor of the House.

Mr. Speaker: I listened with care to the hon. Member for Windsor and Eton.

Dr. Glyn: Maidenhead.

Mr. Speaker: Maidenhead. They are both respectable names. I am sorry that I cannot change the selection that I have made.

New Clause No. 50

TAX REPAYMENTS TO WIVES

'(1) Where in any year of assessment tax has been deducted under section 204 of the Taxes Act (pay as you earn) from the earned income of a wife and, apart from this section, a repayment of tax for that year would fall to be made to her husband in consequence of an assessment under Schedule E, so much of the repayment as is attributable to the tax so deducted shall be made to her and not to him.

(2) The amount of a repayment attributable to tax deducted as mentioned in subsection (1) above is the excess (if any) of the total net tax so deducted in the year of assessment over the tax chargeable on the wife's relevant earned income included in her husband's total income for that year after allowing—

(a) any relief for that year under section 19 of the Taxes Act in respect of any payment made by her of the kind mentioned in paragraph 14A of Schedule 4 to the Finance Act 1976 (retirement benefits schemes); and


(b) any relief for that year to which her husband is entitled under any other provision of the Income Tax Acts to the extent to which it cannot be allowed because his income, exclusive of her earned income, is insufficient;
but that amount shall not exceed the aggregate of the amounts repayable for that year in respect of the total net tax deducted in that year under the said section 204 from the income of the wife and the income of her husband.

(3) Where in consequence of an assessment under Schedule E any amount is repayable under this section to the wife of the person on whom the assessment is made the inspector shall notify both of them of his determination of that amount and, subject to subsection (4) below, an appeal shall lie against the determination as if it were a decision on a claim.

(4) Any appeal under subsection (3) above shall be to the General Commissioners for the division in which the spouses reside or, if they reside in different divisions, for the division in which one of them resides, as the Board may direct, or if neither resides in Great Britain to the Special Commissioners; and on any such appeal by one of the spouses the other shall have the same rights as an appellant, including any right to require the statement of a case for the opinion of the court.

(5) Where in a case to which this section applies the amount repaid to a wife or her husband exceeds the amount properly due to that person the excess shall be recoverable from that person as if it were unpaid tax.

(6) The Board may make regulations—

(a) modifying subsection (2) above in relation to such cases as may be specified in the regulations;
(b) modifying section 47 of the Finance (No. 2) Act 1975 (repayment supplement) in relation to cases in which a repayment falls to be made under this section;
and any such regulations shall be made by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

(7) This section does not apply to any repayment for a year of assessment—

(a) for which the husband is chargeable to income tax at a rate or rates higher than the basic rate; or
(b) for which any earned income of the wife has been assessed otherwise than under Schedule E.

(8) For the purposes of this section earned income of a wife has the same meaning as for the purposes of subsection (2) of section 8 of the Taxes Act and relevant earned income of a wife means so much of her earned income as exceeds the relief available in respect of it under that subsection.

(9) References in this section to the total net tax deducted in any year under section 204 of the Taxes Act are references to the total income tax deducted during that year by virtue of regulations made under that section less any income tax repaid by virtue of any such regulations.

(10) This section applies to any repayment made after the passing of this Act.'.—[Mr. Joel Barnett.]

Brought up, and read the First time.

The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move, That the clause be read a Second time.

Mr. Speaker: With this we may take amendment (a), leave out subsection (7).

Mr. Barnett: Heywood and Royton are very respectable names as well.
This new clause extends the rights of married women to receive their own repayments of pay as you earn tax by statutory right. The new clause will give this statutory right to about 6 million earning wives at present within the PAYE system. Frankly, it is incredible that this has not been done before. I am, therefore, delighted to be able to move this new clause.
Perhaps at the outset I should pay a tribute to the Equal Opportunities Commission, the Woman's Own magazine, The Sunday Times, their readerships, my hon. Friend the Member for Thurrock (Dr. McDonald), my PPS, who has done a great deal, and everyone else who has helped to ensure that this new clause gets on to the statute book, perhaps even including myself.
I must make it clear at the outset that I do not pretend that the clause deals with the fundamental problem of aggregation, which has been on the statute book as long as income tax itself. It goes back to 1806. We have had aggregation all the time in our income tax system.
The Equal Opportunities Commission recognises the major difficulties involved in changing the system of aggregation, and it looks forward, as I do, to seeing results from the replies that there are likely to be to the very interesting document which it has issued setting out the various options for dealing with the major and fundamental problem of aggregation. Arising out of the discussions on that document and discussions which we hope to have, I look forward to the widest consultations to see how it might be possible to resolve some of the inherent difficulties which we shall have in seeking to change the system of aggregation in our income tax arrangements.
As I say, the clause does not deal with that fundamental problem. However, deals with at least one major source of complaint, which is the complaint that


married women genuinely have that their income tax repayments frequently have been paid to their husbands—sometimes husbands who have left them at the time that they have received the income tax repayments. There have been examples of money which should have gone to those wives going to their husbands. I am pleased that this clause will go some considerable way to relieving that problem.
The existing pay as you earn regulations already provide for repayment to a wife of pay as you earn over-payment during the course of a tax year. This clause ensures that repayments of PAYE tax will be made after the year end to the wife where previously they were made to the husband.
There is another important change inherent in this clause for what might be called the breadwinner wife—the wife who is working and who obtains the allowances of her husband, who is not working for a variety of different reasons. In such a case, where a repayment was due as a result of the husband's additional allowances being unused, previously the repayment was made to the husband even though the husband was not working and had no income. Clearly the repayment should have gone to the wife, and that, too, will be rectified under this clause.
As I say, the clause does not provide a complete answer. However, at the same time we are taking some administrative action which will deal with some other legitimate complaints which married women at work have had. One, for example, concerns the question of correspondence, which understandably annoys many married women; where income tax districts should be writing to wives in respect of their earned income, they have been writing to their husbands. Instructions have now been issued to income tax officers to ensure that letters go direct to the married women.
Thene there is a tax form—form 33—which has on the back a form of words which married women find extremely insulting, and I do not blame them for feeling aggrieved about it. It is the form which says "If you are married and living with your husband, do not bother completing this form. Hand it to him." Of course, there are some people who would be only too delighted if they were

told to hand a tax form to someone else to complete. But that form of words rightly offends many married women, and we are proposing to remove them.
The other administrative action whereby we seek to help is where there is an option available to married taxpayers to claim separate assessments. This is quite different from separate taxation, where higher rate taxpayers earning more than a certain amount obtain some financial benefit from claiming separate taxation. A couple can claim to have their tax dealt with separately, although the fundamental problem of aggregation remains. At the moment, far too few married women are aware that this option is available to them, and we shall be issuing leaflets towards the end of this year to explain this option very clearly to married women. I hope that that will enable them to have their tax affairs handled to their better satisfaction.
I shall be happy to answer any questions arising out of the new clause or on any matter related to it. But perhaps at this point, since it relates to provisions in the new clause, I might deal with amendment (a) which seeks to leave out subsection (7) of the new clause.
Subsection (7) means that the relief provided here does not apply either to schedule D taxpayers or to higher rate taxpayers. I want to explain why that is, why, if anything, the amendment would make the position worse and why, therefore, I do not recommend the House to accept it.
For schedule D taxpayers, where a husband or wife is assessed under schedule D, by the very nature of things—because of the way that schedule D works—it would be very difficult to write such a provision into the clause as it stands. Under schedule D, invariably there are very late assessments in respect of any one year. It would require complex legislation to separate the allowances between a husband and wife, and it would be extremely unclear without complex legislation whether the allowances should be allocated to the spouse who is assessed under schedule D or schedule E, PAYE.
The amount of the repayment would depend on how those allowances were allocated to the schedule concerned. Therefore it would not only create extreme difficulty and need very complex


legislation, but it could lead to the very reverse of what we seek to do in this clause. It could lead to awkward disputes between spouses about which of them was entitled to the allowances under schedule D or schedule E. Of course, the simplest solution would be for them to claim separate assessment, which I hope to be able to make clearer during the course of the year.

Mr. Tony Newton: It seems to me that what the Chief Secretary is saying implies that this affects cases where the husbands have schedule D income. Subsection (7) says nothing about cases where husbands have schedule D income. It relates only to cases where the wives have schedule D income. I am not sure whether the right hon. Gentleman's remarks are strictly relevant to subsection (7) as it stands at the moment.

Mr. Barnett: The hon. Member is quite right. The clause applies to cases where the wives have professional or business income assessed for tax under schedule D. But the principle of what I am saying is the same. Whoever has schedule D income, frequently the assessments are made very late. It would be very difficult to see where the allocation of allowances should go—whether to the husband, if he is under schedule E, or to the wife assessed under schedule D. It would mean cases arising much later than under the PAYE system, and it would create very great difficulties. I am perfectly happy to look at this to see whether we can deal with it, but it would require much more complex legislation than this already very long new clause. As I say, the simplest solution for the spouses would be to claim separate assessments. In that way, whether the wife was on schedule D or schedule E, they would be able to have the allowances allocated properly.
On the other part of what the hon. Member for Braintree (Mr. Newton) seeks to do in respect of the higher rate, again the problem is that of splitting the higher rate liability between the spouses. In most cases where the couple have a combined income which makes them liable to the higher rate of tax they already claim separate tax assessment, so it would not apply.
4.0 p.m.
However, it would require somewhat complex legislation to deal with a problem which exists in very few cases. Just to leave out subsection 7 would not deal with the problem with which the hon. Member for Braintree (Mr. Newton) seeks to deal.
The new clause is a first but a most important step along the road which I know the hon. Member for Braintree has wanted to tread for a long time—not since 1806, because he has not been around that long. However, I am bound to say that listening to him for the last four-and-a-half years in Finance Bill Committees it sometimes seems that long. I did not intend that to be uncomplimentary in any way and if it sounds like that, I apologise.

Mr. Newton: I freely forgive the Chief Secretary because I know what a charming person he is. I can date the time of my interest in this matter—it was when my wife began to have some substantial earnings.

Mr. Barnett: I note the hon. Member's personal interest in the matter. It is shared by many hon. Members who have not only a personal interest but an interest on behalf of their constituents up and down the country who feel very badly about the situation. I believe that this new clause does put right a very serious wrong that many married women have suffered. They have waited far too long to have it remedied. I look forward to being able to do much more in the years ahead, but meanwhile I commend the clause to the House.

Sir Geoffrey Howe: I am glad to respond to the Chief Secretary by welcoming the new clause with a number of qualifications. I suppose like many other hon. Members I should begin by declaring an interest. I am not only in possession of—that is the wrong word; I should say that in my almost 25year-long association with my wife, she has been working for quite a lot of that time. Recently she has been deputy chairman of the Equal Opportunities Commission, so it would be more than my life is worth not to join the Chief Secretary in paying tribute to the work done by that body in creating a climate to make the introduction of this clause possible.
I should also pay tribute to the work done in Standing Committee by my hon. Friends the Members for Braintree (Mr. Newton) and Maldon (Mr. Wakeham) who have studied this very closely and have forced the subject on the attention of the Government in this year's debates.
The clause had about it a rather cosmetic quality, and the more we have listened to the Chief Secretary presenting it, the more cosmetic it has appeared. It seems to be a less than adequate response to the growing chorus of complaints about the way in which the present income tax system operates as between the sexes. I do not think that the new clause will go a very long way towards endearing the Chief Secretary of the present Government to the women of this country. We already know that a substantial majority of them are faithful supporters of the Conservative Party, and no doubt they will remain so. But the right hon. Gentleman must do his best. At least he has recognised that there is a problem that is causing genuine and increasing resentment, most of which is still unresolved by this proposal.
The new clause deals with the problem of the refund—the wife's right to secure a refund of her own tax. It is a measure of our inadequacy that we have only just begun to deal with this now. However, the clause does not deal with a number of other things. It does not deal with the problem that arises where the husband is liable to tax at a higher rate, and where the wife is assessed otherwise than under schedule E.
Is there not in the very words of subsection (7) an insight into the latent chauvinism in our system? Subsection 7(a) makes an exclusion in respect of a situation where the husband is chargeable for tax at a higher rate but not where the wife is. Subsection 7(b) makes an exclusion where the earned income of the wife is assessed otherwise than under schedule E. It is very difficult to understand why the exclusion is made only where the wife is, for example, on schedule D although the Inland Revenue is prepared and able to cope with the situation where the husband is on schedule D.
The very fact that in a provision designed to emancipate women from the restrictions that the system imposes upon

them we find these two qualifications lurking in terms of "the husband" and "the wife", shows how far we have yet to go.
There are much more substantial provisions that have not been dealt with. Underpayments of tax by the matrimonial pair will still be the responsibility of the husband. Moreover, underpayments of tax for many years back, even after the wife has flown from the nest, will remain the responsibility of the husband. The wife still has to disclose to her husband her possession of an investment income. She will not be able to maintain or accumulate a secret nest egg. The husband will have to declare his wife's investment income.
The married woman who is paying mortgage payments out of her own salary will not be able to get mortgage relief against her salary without her husband's written consent. The Inland Revenue, although it will reply to letters about the wife's income tax position direct to her, has not undertaken to initiate correspondence with her about her tax position. Thus there are many residual discrepancies in this administrative area. We deceive ourselves if we believe that these problems will go away.
The Chief Secretary concedes that this is a modest first step. He says that any further steps that would be urged by people would be more and more complicated. We must ask ourselves whether we intend to go on adding complexities designed to offset the inherent oddity of the system, leaving the basis of it unchanged, or are to ask more fundamental questions.
Of course the Chief Secretary is right in saying that there have been some changes to make the situation less oppressive. The right to separate taxation introduced by my noble Friend Lord Barber in 1971 and the right to separate assessment help in some ways, but the two are less than completely satisfactory. Also they are by no means widely enough publicised or appreciated for them to be enjoyed as they should be.
The fundamental shortcoming still remains. I thought that it went back to 1799 but the Chief Secretary, with his greater access to accurate sources, takes it back only to 1806. But certainly the fundamental shortcoming in the system


has been with us for a very long time—long before the days of a Labour Government and almost certainly in the days of a Liberal Government—

Mr. John Pardoe: No, Conservative.

Sir G. Howe: I think that it is one of those sins for which we must all share collective responsibility over a long period.
It is a remarkable proposition, when one thinks about it, that a woman's income chargeable for income tax should be deemed for income tax purposes to be her husband's and not hers. We have become accustomed over the years to the understandable denunciation of the property law before the Married Women's Property Act of 1882. Therefore, it is remarkable that in tax matters this has gone on for so long.
As long as that is the foundation of the tax regime for husband and wife, it should not surprise us that the system that results gives rise to more and more examples of discrimination that is resented, cannot be justified and makes very little sense in the kind of society in which we live. It may have been all right in 1806, 1842 or 1942, but there have since been huge changes in the nature and scale of the involvement of women in our economic life.
In the first place, more and more women are now at work. In 1951 the percentage of married women at work was less than 12 per cent. of the labour force. The figure is now more than double—about 25 per cent. Two out of three married women between the ages of 40 and 54 are at work. Therefore, the labour force has substantially changed its nature.
Moreover, even before the equal pay legislation arrived on the statute book, the earnings of married women rose substantially. At the same time tax thresholds have fallen. Therefore, in the last four or five years, if we take the position of a married woman manual worker in 1972, 31 per cent. of her income was in the taxable band. In 1976 it had doubled, so that 63 per cent of her income was subject to income tax.
That is only the most recent manifestation of a much more fundamental change. If we have in mind the situation in 1938.

I think I am right in saying that the level at which income tax began to be paid in that year was about two-and-a-half times average industrial earnings. It is now set at less than half industrial earnings.
A huge sea change has taken place. Before the war income tax was payable by the husbands of those who inhabited the "The Forsyte Saga", so to speak. It certainly made no impact on the huge mass of women who were at work. Income tax has long since ceased to be payable only by middle-class men. It is payable by men and women of all classes. That which was designed for "The Forsyte Saga" now bites deeply into the pockets and purses of men and women in "Coronation Street"—indeed, even in Heywood and Royton. The system has been transformed.
Women have become taxpayers on a large scale and increasingly question the basis of the system. This is not something that will go away or change. It is an inevitable consequence of social changes in the last 50 years. At the turn of the century, the average life expectation of a woman was just under 50 years, all told. It has now increased by at least 25 years, or even beyond.
At the turn of the century the average married woman could look forward to having, if that is the right word, a very large family and a large number of children. At present, with the birth control revolution, her average family size is less than three, and nearer to two. At the same time her education has been massively increased. The average married woman now arrives in society better qualified, likely to confine her period of motherhood to a fairly small number of years, and bound to return to the labour market by the time she is 40, at the latest, seeking employment.
Therefore, the Chief Secretary and the Inland Revenue are coping with a world inhabited by large numbers of female taxpayers. One can well understand a reluctance to make changes in the system as we have become used to it. The existing PAYE system has many conveniences for dealing with the complex changing pattern of husbands and wives both at work. As long as the married woman has her married woman's earned income allowance separate and distinct from the married allowance of the husband, she can go into employment and come out of


it quite frequently without there being any need for changes in the code of the husband. That is a real convenience. The Inland Revenue is able, understandably and intelligently, to ignore the earnings of married women below earnings of a modest scale which are below the married woman's earned income allowance.
But I do not believe those conveniences will in the end prove to be a sufficient justification for leaving the present system unchanged. All the developments I have referred to suggest that there is a need for a more fundamental change from the present system to take account of the changes in status which have taken place.
4.15 p.m.
There is a somewhat odd feature about this debate. In theory at least, our tax system, in contrast to others, is based on the concept of the family as the taxable unit—on the aggregation of husband and wife as the unit. The alternative basis which has been discussed by the Equal Opportunities Commission is that the system should be based on the individual as the unit. When we examine the practice in other countries, we see that 11 OECD countries base their tax system on the family, whereas 17 countries have moved over to taxation on an individual basis. Therefore, there has been a movement in that direction. That is an understandable response to pressure from women taxpayers to be treated as individuals by the tax system as a whole.
The odd thing is that, although one would think that the movement from a family basis to an individual basis would damage the family and that our own system which is based on the family is beneficient in its impact on the family, that may well not be the case. A feature of our system which a number of people now notice and complain about is that with two earners in the family, the wife and the husband, both at work, their combined tax allowances are about £2,500, whereas with one earner in the family, taking the husband as the typical case, there is a tax allowance of only £1,500 available. Therefore, the married woman who stays at home and looks after the family, and preserves the family in the traditional sense, does not receive any notional tax advantage from her presence at home. In other words, the balance of

the system favours in fiscal terms the married woman who goes out to work.
A number of people believe that it is wrong that there is insufficient recognition for the work done by the married woman who remains at home as the home-minder, guardian of the family, and so on. Although our system is family-based, we fiscally encourage the wife to go out to work. I am not expressing a value judgment whether a mother should go out to work. It seems to me sensible and acceptable that there should be a freedom of choice. But it is open to question whether we should have a fiscal system which is not neutral in relation to that choice but which encourages the mother and the wife to go to work and which does not give comparable recognition to the part played by the mother and the wife who stays at home. That is one of the other fundamental questions we have to face.
The introduction of child benefits—a "son or nephew" of our tax credit system—helps because child benefits are payable to the wife in relation to the number of children in her family and can be made—this applies in the French system—to some extent to recognise the importance of home care for the family. But the question still remains whether we should be doing more to provide greater recognition for the discharge of home responsibilities by the wife who stays at home.
The Equal Opportunities Commission suggests for consideration a cash payment or tax allowance in respect of that. I am not persuaded that either is necessary or necessarily right, but certainly they are among the options that we should all study. We in the Conservative Party are studying them in the hope of bringing forward conclusions shortly.
I am sure that the objective should be neutrality between the working wife and the non -working wife. It begins to look as though the best way of meeting this as a matter of fiscal policy would be to provide for each individual—husband or wife, or man or woman—a basic personal allowance of the same size regardless of sex or married status but claimable either against his own or her own personal income or against that of the spouse. Therefore, one would be able to aggregate two personal allowances against the combined income of husband and wife.


if both are at work, but against the single income of the husband if he is the only wage earner at that moment. This would involve some alteration in the structure of the allowances and is not a change that could be made overnight, but it would at least achieve a situation in which husband and wife, man or woman, were being treated as individuals in their own right and in which the role of the spouse who stayed at home would be given equal value with the role of the spouse who went to work, so that the tax system would be neutral.
As with any other change, this would involve some alteration in relativities. The two-income family would not be relatively as well-off as the one-income family. But one cannot make the one-income family relatively better off without making the two-income family relatively less well off. These are questions to which those who argue for a fundamental change must address themselves. My hon. Friend the Member for Braintree drew attention to this fact in Committee upstairs.
I hope that it is of some value for me to indicate how far we have to go if we are to make the sort of changes that will become inevitable and are desirable. I do not mean to be too churlish in the limited enthusiasm of my response to the cosmetic of the Chief Secretary because this system has remained unquestioned for a very long time, but the right hon. Gentleman has a long way to go and he must address himself to the failure to disaggregate investment income of husbands and wives. We cannot indefinitely go on proposing changes in the tax treatment of husbands and wives without recognising the injustice of lumping them together for the purposes of taxing investment income.
I welcome the new clause with many qualifications. I am confident that I can rely on the support of the overwhelming majority of women, who already give their support to the Conservative Party, to enable us at the earliest possible opportunity to carry forward the work on which the Chief Secretary has made such a modest start.

Mr. Newton: I have already declared an interest indirectly during an intervention in the Chief Secretary's speech. I have an earning wife, though I stand to

secure no financial gain from the passage of the new clause but simply a freedom from my wife's complaints about the way in which the Inland Revenue deals with her and makes repayments to her. That is a blessing to be desired.
I welcome the new clause as a whole, but I should like to refer particularly to amendment (a). Although the Chief Secretary sought to pre-empt the amendment and any arguments that I might adduce for it, I remain more than a little dissatisfied with the arguments he put forward to defeat the point of the amendment.
I tabled the amendment because, as the Chief Secretary acknowledged, the new clause is limited in the context of the argument as a whole, and with subsection (7) left in it, the clause is very limited even in helping those whom it seems to be helping. It clearly does not apply to any wife who is self-employed. It applies only to PAYE deductions, presumably under schedule E, from employment income. We know from subsection (7) and what has been said that it does not apply to any woman who, whether or not she is entirely self-employed, has even a little bit of self-employment. She may have a substantial income under PAYE, but if she has any schedule D income at all, she will be ruled out from the benefits of the clause.
Similarly, if the husband has an income which takes him into the higher tax rates, the wife does not get the benefit of the new clause, but that use of the husband's income in subsection (7) begs the question. By definition, the husband's income at present includes the wife's. Does the subsection mean that where the wife's income, together with that of her husband, takes the pair of them into the higher tax bracket, the wife will be excluded from the benefits of the clause? If so, it must follow from these three exclusions—the self-employed woman, the partially self-employed woman and the couple whose income gets above the higher rate threshold—that the number of people who will benefit is quite small.
There are very many cases where the husband is on, say, average weekly earnings and the wife has an income which may not be at all substantial but together they will be getting close to the higher tax rates. If the subsection means what I think it means, a substantial number of


women will be excluded from the benefits of the new clause.
I shall be interested to hear from the Chief Secretary whether he has made an estimate of how many women might benefit from the new clause as it stands and how many might benefit if the amendment were incorporated in the new clause. I appreciate that it may be impossible to make those estimates, but I suggest that the clause is much more limited than it appears and that it will not benefit anything like as many women as the Chief Secretary implied.
I turn to the broader background of the new clause and the wider remarks of the Chief Secretary and my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). I am grateful for what my right hon. and learned Friend said about what was done in Committee, and in view of the ground covered there and the opportunity that I had to speak on this subject at that time, it would be wrong for me to take a great deal of the time of the House on the broader issues.
We are all agreed that neither the new clause nor anything the Government have done in the past few weeks touches the fundamental problem of aggregation and the fact that legally the wife's income is that of her husband. I merely restate my view that the acceptability of that position to the majority of women in this country is rapidly disappearing. For understandable reasons, the Chief Secretary has been able to dodge dealing with the big questions this year. I am not seeking to be offensive to the Chief Secretary, any more than he was seeking to be offensive to me.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): But the hon. Gentleman is being more successful.

Mr. Newton: I understand why the Chief Secretary has preferred not to tackle the really large questions this year, but as a House we shall not be able to continue avoiding them for very much longer.
I welcome what my right hon. and learned Friend the Member for Surrey, East said, because I also believe that the almost inevitable way forward is that we should move to a situation in which each adult is entitled to a personal allowance of his or her own and that for

married couples the allowances should be transferrable not simply from the wife to the husband but when the wife is the breadwinner—and not much attention has been paid to such cases so far—transferrable from the husband to the wife. One of the injustices in the present system is that a wife can get the advantage of the husband's allowances but a husband cannot get the advantage of the allowances his wife could acquire if she were at work. That is another problem that we have to consider.

Mr. Ian Wrigglesworth: While logic and equity are on the hon. Gentleman's side, does he not agree that getting to the position that he has described will need a lot more debate and that we shall have to convince people and change attitudes throughout the country? There will be great antagonism from some people, wrongly in my view, to the position that he wants to see brought about.

Mr. Newton: That may be true, but that antagonism is already declining steadily and the antagonism to the existing system and the inevitable humiliation it can involve for a wife in some circumstances—regardless of what the Chief Secretary is proposing—is growing very fast indeed.
As we know from the work of the Equal Opportunities Commission, some marriages have come close to breaking up because the tax system has revealed to one spouse the unknown income of the other. Wives who have struggled to save a little on their own have found the money forcibly disclosed to the husband by the Inland Revenue with significant and sometimes almost disastrous consequences. There is no way of dealing with that sort of problem in modem marriage without tackling the fundamental problem of treating the wife's income as part of the husband's income.
This will raise difficult questions about the reduction in the tax burden that could follow for many high income married couples. It will raise acutely difficult questions, and I suspect that it will be somewhat more difficult for Labour Members than Conservative Members when we come to decide how investment income is to be treated. A number of those who are demanding equal treatment for women run a mile as soon as it is suggested that wives should be allowed


their own separate exemption from the investment income surcharge and, in effect, should be allowed to enjoy the benefits of their own savings. That is another difficult question and I might find it easier to answer it than some Labour Members.
4.30 p.m.
At least I am clear about the direction in which we should be moving. For that reason I greatly welcome the comments of my right hon. and learned Friend the Member for Surrey, East.
I ask the Chief Secretary to say a few words about three subjects which are of special interest and importance to some groups but which are not touched on by the clause. I ask the right hon. Gentleman whether he has any ideas about how he might be able to tackle them, or how he might be able to make improvements.
First, there is the nagging problem of tax relief on mortgage interest where the wife—the issue usually arises in this form—ex-wife or separated wife is paying mortgage interest but for many months finds it almost impossible to get the tax relief transferred from her husband to herself. It is a problem that has been drawn to our attention by a number of outside organisations. They have given case histories where wives have been put in acutely difficult circumstances because they have been repaying the mortgage and have found it almost impossible over a long period to get the Inland Revenue to allow them tax relief.
There is a similar problem, I understand, in a mother obtaining the payment of child tax allowances when she has care and custody of the children, the marriage having broken down. It is often found that the payments are not made to her for some time after the breakdown of the marriage. Again, the problem has been drawn to our attention by outside bodies. It may be that the difficulty will disappear with the impending disappearance of child tax allowances, but meanwhile it appears to be a real problem. I am sure that there axe many who would welcome a word about it from the Chief Secretary today.
Thirdly, there is an issue that is much canvassed by bodies such as the National Council for One Parent Families and the Child Poverty Action Group. I refer to the variation in tax treatment between

different forms of maintenance payments and the difficulties that that can sometimes cause for those who fail to get their arrangements tied up in the best possible legal way. Often difficulties arise because they do not have good advice.
That is a subject of some complexity and I hesitate to take up the time of the House with a long elaboration. However, it appears to be of some importance and, perhaps, of growing importance. In the context of our debate it would be helpful if the Chief Secretary said a few words about it.
I welcome the clause as a whole. I hope that there will be support for the amendment. I hope that the Chief Secretary will give some indication of the way in which he proposes to move forward.

Mr. Douglas Crawford: I shall speak briefly in support of what the hon. Member for Braintree (Mr. Newton) has said and in support of amendment (a) to new clause No. 50.
We have come a long way since the days when it was the custom for a man not to tell his wife his earnings. I venture to suggest that we have not gone far enough. By the insertion of subsection (7), the Chief Secretary appears to have been a little grudging. It is a pity that the hon. Member for Thurrock (Dr. McDonald) is not present to comment on that.
The crux of my argument is that in Scotland, and no doubt in many other parts of the country that are not as fortunate as London and the south-east, it is often the wife who is the breadwinner. There are parts of Glasgow which have about 50 per cent. male unemployment and very much less female unemployment. That is relevant to the debate. The Chief Secretary seems to be a reluctant convert from being a male chauvinist. I am reminded of St. Augustine, who said "Save me Lord, but not yet."
I should declare an interest. My wife is self-employed. As the hon. Member for Braintree said, many women are self-employed. It seems wrong that there should be the hedging in the new clause, which states:
a repayment of tax for that year would fall to be made to her husband in consequence of an assessment under Schedule E, so much of the repayment as is attributable to the tax so


deducted shall be made to her and not to him.
By the insistence of the Treasury that schedule E be the only criterion. I believe that it is denying itself its own case.
I am sure that the Chief Secretary is not a male chauvinist, and I hope that he may be seen not to be one. I look forward to his comments on the amendment. I accept that it may be difficult to estimate the cost, but I am sure that we shall all be grateful if the right hon. Gentleman is able to give us some broad indication of the cost of deleting subsection (7).

Mr. Marcus Kimball: On the general principle of the new clause, which everybody seems to be endorsing with much enthusiasm, I express my personal view with a certain lack of enthusiasm for the way in which the clause is going.
The Chief Secretary has made it clear that the clause applies only to earned income. It does not apply to unearned income. I do not believe that there is a horde of hard-working, big-earning women demanding the change that is proposed. In my experience, most women when faced with an income tax demand, or any form of taxing, shove the demand across the table to their husband, or at best pass it to their accountant. I do not believe that there is great demand for this step. I should like to think that it will be activated only by tax-conscious women who take the trouble to write to the Inland Revenue to ask that they be treated in the way that is proposed.
I am relieved that at this stage the clause is not being extended to include unearned income. If a woman is in receipt of a marriage settlement, it seems wrong that she should get the tax repayments that are due to the husband who has probably made the marriage settlement on her. I am glad to see that the Chief Secretary is sympathetic.
I hope that we shall not rush headlong down the slope that is before us. I do not think that there is a great undertone of demand for the step that is proposed. I regard the manoeuvre with some suspicion.

Mr. John Wakeham: I am sure that the debate would not have

been complete if my hon. Friend the Member for Gainsborough (Mr. Kimball) or another hon. Member had not voiced reservations about any changes that we might make in the tax system.
Those of us who are welcoming the changes that the Chief Secretary is proposing and who would like him to go much further would be right to recognise that the overwhelming majority of taxpayers want not a complicated tax system to achieve equity between husband and wife but a simple and clear system by which they as a family may discharge their joint responsibilities to the taxman in the easiest and most practical way possible. I am certain that to achieve that is to achieve for the majority of taxpayers what they really want.
Nevertheless, we have to recognise that for a substantial number of taxpayers the present system is grossly unfair and unjustifiable. It is right, and long overdue, that Parliament should address itself to the problem. We should pay a warm tribute to the right hon. Gentleman for having the privilege of bringing forward the new clause, even if we may question exactly what his motives were in doing so this year. I am certain that they included the highest of motives, but underneath those it may be that one or two other considerations crossed his mind.
When the right hon. Gentleman paid tribute to all those who have pressed him to take action and have pushed him forward, I noticed that he mentioned my hon. Friend the Member for Braintree (Mr. Newton) and myself, who originally raised the matter in Standing Committee. From the silence on the Government Benches on that occasion, there was no indication that they had any plans to bring a clause forward. We chided them for not having taken action on the Equal Opportunities Commission's report, which had been available for some time.
I welcome what is being done, and I do not want to rehearse again the points made by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) and my hon. Friend the Member for Braintree. However, it is worth stating once again in a few sentences what I see to be the fundamental problem that must be faced. It is a problem which many who are anxious to make progress in this area still will not take on board.


I refer to the remaining problems of tax legislation.
By and large, the family with the married woman who stays at home is badly treated under our present system. We have a system of personal allowances at approximately two and a half times the single allowance for the family where there are two breadwinners compared with one and half times where only the husband is earning.
There is obviously the question of investment income. I do not see how we can continue much longer to treat all investment income as being aggregated between husband and wife. I recognise that under any fair tax system it will be necessary to continue aggregation for large investment income, but we should be moving towards disaggregation for the lower levels. If we ventilate and discuss the problem sufficiently, we should get the answer in the end.
We should recognise the difficult tax position of families which have only one breadwinner. Many families have gone from a position of two people earning to a position where they have additional expenses with young children and only one breadwinner. In many instances they are some of the hardest pressed members of society. However, they are suddenly presented with a relatively higher tax bill on their income.
In the end, I see no great problem of dealing with support for such families or for the concept that women should as far as possible be treated in the same way as men in our tax system. Each adult should he entitled to a personal tax allowance. That should be the basis of our tax system. However, I recognise that for the higher incomes aggregation will continue to be a feature of our tax system for many years to come.

Mr. John Cronin: I think that we have had a remarkably interesting debate on this subject. I think that all right hon. and hon. Members feel that much more should be done to help women—particularly married women.
I was somewhat astonished by the remarks of the right hon. and learned Member for Surrey, East (Sir G. Howe), because he said that the overwhelming majority of women support the Conservative Party. If he believes that, he can believe anything. It is so remote from

the facts of life that it throws discredit on what I think was to a great extent a helpful speech.
I congratulate my right hon. Friend the Chief Secretary to the Treasury on bringing forward the new clause. I have put some pressure on him in the past few years to induce the Treasury to take a more up-to-date view about the position of women in modern society. I am glad that this may have borne some fruit and not fallen on stony ground. The Chief Secretary is an amiable person of very wide views. He is happily married and understands these problems very well. I think that we are fortunate that he should have applied his mind to this matter.
New clause no. 50 is admirable in every way, but I suggest that much more can be done for women than is in the new clause. I appreciate that when dealing with the Treasury, even the most enlightened of people, such as my right hon. Friend, have to cope with a great deal of uphill work. There are built-in prejudices and ideas which have gone on for hundreds of years. For my right hon. Friend to achieve reforms in the Treasury is rather like somebody wearing gumboots wading through a sea of treacle: it is hard work. Nevertheless, something has been achieved, although there is much more to do.
4.45 p.m.
The Treasury must accept two important and basic facts. One is that we have reached the stage in modern philosophy where women are entitled to be treated exactly the same as men for all practical purposes. Of course, they cannot he treated exactly the same as men because of their essential biological differences. My professional education has made me think in wider terms than mere figures and Treasury statistics.
The basic problem is that reproduction, as far as the male is concerned, can take place in a very brief period. But for a woman reproduction involves about nine months plus several years of bringing up the children. The Chief Secretary is looking puzzled. I should have thought that was a truism. It is important that women, who have to go through the reproductive and bringing-up stage, should not be penalised by anyone, least of all by the Treasury. Women who are unable to go out to work, because they have to bring up children in the early stages of their


married life, should not be penalised by taxation. They are penalised, because one earner gets tax allowances of about £1,500 whereas two earners get tax allowances of £2,500. I suggest that is a clear-cut discrimination against women when they are going through an important phase in the interests of the whole of civilisation as we know it. I suggest to my right hon. Friend that, although reforms have been made in the Treasury, there is room for much more.
A strong case was made by the right hon. and learned Member for Surrey, East in favour of there being a difference in the treatment of investment income of husband and wife. There is no logical reason why they should be treated absolutely separately. Nevertheless, the Treasury is to a substantial extent treating them together. I suggest, that although the reforms introduced by my right hon. Friend are excellent and point the way for the future, much more progress can be made. The time has come when the idea that men and women should be treated differently on taxation matters is an absolute nonsense. I think that it should be stopped. Therefore, I suggest that, despite the excellent work done by my right hon. Friend, much more needs to be done. I am sure that right hon. and hon. Members on both sides of the House will applaud him if he achieves it.

Mr. Joel Barnett: First, I thank my hon. Friend the Member for Loughborough (Mr. Cronin) and all right hon. and hon. Members who have spoken in the debate for their kind, though sometimes churlish, welcome to the new clause. I could not quite understand why the right hon. and learned Member for Surrey, East (Sir G. Howe) should have been churlish. I have not totted up the figures, but I think that there have been more Conservative Governments than Labour Governments since 1806 and they failed to deal with the problem. Therefore, he need not have been quite so churlish.
I recognised at the outset of my remarks, as did the right hon. and learned Gentleman, that this fundamental problem was the cause of many of the difficulties with which the hon. Member for Braintree (Mr. Newton) asked me to deal. Although the new clause was welcomed

by the hon. Member for Braintree, I noted that the right hon. and learned Member for Surrey, East was careful—I do not blame him for being so careful—to talk about one of the variety of options which the Equal Opportunities Commission had suggested for dealing with the fundamental problem of aggregation being a home responsibility allowance in cash or changing the tax allowance.
The right hon. and learned Member for Surrey, East was correct to say that the major problems involved in making this fundamental change are the net gainers and the net losers that inevitably there would be in the change that he described and to which the Equal Opportunities Commission referred in its booklet. I appreciate the right hon. and learned Member's deep understanding of these matters.
I know that the hon. Member for Braintree will claim to be innocent of being a chauvinist in this context. But the right hon. and learned Member for Surrey, East made a somewhat chauvinistic slip when he began to talk about his possession—namely, the deputy chairman of the Equal Opportunities Commission who is his wife. The right hon. and learned Gentleman quickly changed what he was about to say. I am sure that whatever he might have said he did not intend to say it. I absolve him from what he nearly said. I know the difficulties that he might otherwise encounter with the deputy chairman of the Equal Opportunities Commission.
I do not know why he attacked the clause for what it seeks to do. He said that the clause had a cosmetic quality and that it was a less than adequate response. He said that it would not endear me to women. But that is my major objective at all times, at least to one particular woman—my wife. My wife is always at the head of the list of women to whom I wish to endear myself. By saying that this is not an adequate response, the right hon. and learned Gentleman shows that he does not understand what I said earlier.
The new clause does not deal with the fundamental problem of aggregation. The right hon. and learned Gentleman's remarks about the days of "The Forsyte Saga", when working married women


did not pay income tax, were remarkable. Of course they did not pay income tax. They did not have much income either. We are now in a different situation. I hope that the right hon. and learned Gentleman was not suggesting that we should go back to the position when married working women—and married working men—did not pay income tax. I am sure that the majority prefer the existing system.
I do not wish to be as controversial as the right hon. and learned Gentleman. I recognise that there is a problem relating to aggregation. I await the results of the consultations that will arise out of the Equal Opportunities Commission document and the wider consultations that we hope to have so that we can move forward as quickly as possible.
I turn to the case made by the hon. Member for Braintree. I am sorry that he and his hon. Friend the Member for Maldon (Mr. Wakeham) are upset because I did not pay tribute to their efforts. I included them among the etceteras. I assumed that they understood that I intended to include all those who put pressure on me to take this action.
The hon. Member for Braintree asked some specific questions. The mortgage interest problem stems largely from the fundamental problem of aggregation. He must know that because of aggregation the husband is liable to pay the wife's tax as well as receive her repayment.
The hon. Member tabled an amendment to clause 19 in Committee dealing with maintenance payments. The amendment was not selected. He referred to that matter in passing and the Minister of State said that we would examine the problem. We shall see whether there is any way of moving forward on this matter.
The hon. Member for Braintree also asked about child tax allowances. Problems arise if there is a dispute, when a marriage breaks up, about who is responsible for the children of the marriage. Whenever possible, we seek to ensure that there is a split of the child tax allowances. But in the future that will not be so much of a problem as we move away from child tax allowances.
My hon. Friend the Member for Loughborough said that he did not wish to penalise women. I am sure that I do

not have to tell him that the last thing in the world that I would wish to do is to penalise women, or anyone else, whether married or single. The move that we have made on child benefits is a greater help to the family than child tax allowances. It is widely recognised as a move towards helping in particular those families in which the wife does not go out to work because she chooses to bring up the children herself. Child benefit is an enormous help in that direction.
Amendment (a) would delete subsection (7). I have pointed out the problems that are created by that proposal. If the amendment were carried, the problems would be considerable. The hon. Member for Perth and East Perthshire (Mr. Crawford) asked about the cost of accepting that amendment. It is not intended to cost anything, but it is not workable. We have examined the proposition carefully to see whether it could be made workable. There is a problem in ascertaining the amount of the wife's schedule D income. In cases where the sum is small and the woman is working under PAYE it is taken into account in the code for the year in question. But there are problems involved in delayed assessments. It is difficult for the Inland Revenue to know when the schedule D tax is paid. The husband might have already paid it in his assessment for his wife.
If subsection (7) were removed, hon. Members would not achieve their objective. They would create considerable problems and argument between spouses about where the allowances should fall. The amendment could in practice make the position worse.
I turn to the question of the higher rate tax liability. The hon. Member for Braintree said that more couples would be brought into higher rate tax. I am sure that he recognises that the couple's joint income, even when only the personal allowances are involved, would have to be in excess of £10,000.
The hon. Member for Braintree said that a large number of couples would be caught by subsection (7) as it stands. But that is not so. In practice all the 6 million working wives under PAYE will be able to obtain this benefit. If we remove that subsection the objective will not be achieved and the position will be made extremely difficult. However, if


between now and next year we can move in the appropriate direction in order to help, I shall be happy to examine the matter again.

5.0 p.m.

Sir G. Howe: It is an unusual, not to say exhilarating experience to have absolution pronounced upon me by the Chief Secretary. Among the many roles that he has occupied, to find him in this quasi-episcopal role is unnerving. He was more true to type when he was misunderstanding my reference to "The Forsyte Saga", because I am sure that neither he nor I would wish to go back to the lower real living standards of "The Forsyte Saga" times. My point is that because of rising living standards and the rising capacity of the State to tax the citizen, a great number of women have moved into the tax net, and we need to make changes of the kind we discussed to deal with that.
One matter that we should in some way place on the record is that in this debate, the first of the afternoon devoted to the taxation of women, and married women in particular, not surprisingly, no member of the Liberal Party has spoken, although its economics spokesman, the hon. Member for Cornwall, North (Mr. Pardoe), was here showing an alert interest in these proceedings. It is, however, surprising that throughout the proceedings not one woman has spoken or even been present to listen to the proceedings of this gallant male gathering which is seeking to do what it can to advance the condition of women in the face of the tax system. Perhaps most surprising of all is that the Scottish National Party, of which no less than 18 per cent. of its parliamentary membership is accounted for by women, has not taken part in the debate.

Mr. Joel Barnett: Will the right hon. and learned Gentleman permit me to put on the record that my hon. Friend the Member for Thurrock (Dr. McDonald), who is my Parliamentary Private Secretary, is in a Select Committee and has apologised to me for not being able to be present?

Sir G. Howe: The Chief Secretary's Parliamentary Private Secretary has been in a special position throughout these proceedings because in the Standing Com-

mittee upstairs she was provoked, goaded and taunted into expressing a view on these matters. As I understand from what I have read, she was making vigorous facial expressions throughout the proceedings without actually uttering a word, and it is interesting to reflect on what must have been going on.
It is still odd that in these proceedings today, on a day when the Government have made a move of this kind, not one woman has spoken or attended to our proceedings.

Mr. Cronin: I understand the right hon. and learned Gentleman's point, but is it not a long-established tradition that those who have some financial advantage in a debate do not participate in it?

Sir G. Howe: The hon. Member for Loughborough (Mr. Cronin) is always a stickler for parliamentary etiquette and protocol, but he raises his standard even higher than we previously believed possible. We all have an interest of a kind in these proceedings, but on this particular matter all that the Chief Secretary is proposing is that the money to which women are entitled from the Revenue should go back to them directly rather than through their husbands.
We do not feel that the Chief Secretary has answered satisfactorily the point raised by my hon. Friend the Member for Braintree (Mr. Newton) in his amendment. The right hon. Gentleman said that it would not be workable to make the changes that would follow deletion of subsection (7). That is, no doubt, what previous Chief Secretaries were being told only weeks ago about the fundamental purpose of the clause. It is remarkable how unworkability can finally be overcome.
The surprising aspect of that proposition is that it is workable to make special provision for the husband in paragraph (b) and for the wife in paragraph (a). Because we find that an unconvincing position I invite my hon. Friends to vote in support of my hon. Friend's amendment, if only pour encourager the Chief Secretary or his successors in office, who will shortly be succeeding him, to carry on the good work at which the amendment makes a start.

Question put and agreed to.

Clause read a Second time.

Amendment (a) proposed to the proposed clause, in line 39, leave out subsection (7)—[Mr. Newton.]

Division No. 254]
AYES
5.06 p.m.


Adley, Robert
Grant, Anthony (Harrow C)
Morgan, Geraint


Aitken, Jonathan
Gray, Hamish
Morgan-Giles, Rear Admiral


Alison, Michael
Grieve, Percy
Morris, Michael (Northampton S)


Arnold, Tom
Hall-Davis. A. G. F.
Morrison, Charles (Devizes)


Atkins, Rt Hon H. (Spelthorne)
Hamilton, Archibald (Epsom &amp; Ewell)
Morrison, Hon Peter (Chester)


Atkinson, David (B'mouth, East)
Hamilton, Michael (Salisbury)
Neave, Airey


Bain, Mrs Margaret
Hampson, Dr Keith
Nelson, Anthony


Baker, Kenneth
Hannam, John
Neubert, Michael


Banks, Robert
Harrison, Col Sir Harwood (Eye)
Newton, Tony


Bell, Ronald
Harvie Anderson, Rt Hon Miss
Normanton, Tom


Bendall, Vivian
Haselhurst, Alan
Nolt, John


Bennett, Sir Frederic (Torbay)
Hastings, Stephen
Onslow, Cranley


Bennett, Dr Reginald (Fareham)
Havers, Rt Hon Sir Michael
Oppenheim, Mrs Saliy


Benyon, W.
Hawkins, Paul
Osborn, John


Biggs-Davison, John
Hayhoe, Barney
Page, John (Harrow West)


Blaker, Peter
Hicks, Robert
Page, Rt Hon R. Graham (Crosby)


Body, Richard
Hodgson, Robin
Page, Richard (Workington)


Boscawen, Hon Robert
Holland, Philip
Parkinson, Cecil


Bottomley, Peter
Hordern, Peter
Pattie, Geoffrey


Bowden, A. (Brighton, Kemptown)
Howe, Rt Hon Sir Geoffrey
Percival, Ian


Boyson, Dr Rhodes (Brent)
Howell, David (Guildford)
Peyton, Rt Hon John


Braine, Sir Bernard
Howell, Ralph (North Norfolk)
Pink, R. Bonner


Brittan, Leon
Hunt, David (Wirral)
Prentice, Rt Hon Reg


Brocklebank-Fowler, C.
Hunt, John (Ravensbourne)
Price, David (Eastleigh)


Brooke, Hon Peter
Hurd, Douglas
Prior, Rt Hon James


Brotherton, Michael
Hutchison, Michael Clark
Pym, Rt Hon Francis


Brown, Sir Edward (Bath)
Irving, Charles (Cheltenham)
Rathbone, Tim


Bryan, Sir Paul
James, David
Sees, Peter (Dover &amp; Deal)


Buchanan-Smith, Alick
Jenkin, Rt Hon P. (Wanst'd&amp;W'df'd)
Rees-Davies, W. R.


Buck, Antony
Jessel, Toby
Reid, George


Budgen, Nick
Johnson Smith, G. (E Grinstead)
Renton, Rt Hon Sir D. (Hunts)


Bulmer, Esmond
Jopling, Michael
Renton, Tim (Mid-Sussex)


Butler, Adam (Bosworth)
Joseph, Rt Hon Sir Keith
Rhodes James, R.


Carlisle, Mark
Kaberry, Sir Donald
Rhys Williams, Sir Brandon


Chalker, Mrs Lynda
Kellett-Bowman, Mrs Elaine
Ridley, Hon Nicholas


Channon, Paul
Kershaw, Anthony
Ridsdale, Julian


Churchill, W. S.
Kimball, Marcus
Rifkind, Malcolm


Clark, Alan (Plymouth, Sutton)
King, Evelyn (South Dorset)
Roberts, Wyn (Conway)


Clark, William (Croydon S)
Kitson, Sir Timothy
Rossi, Hugh (Hornsey)


Clarke, Kenneth (Rushcliffe)
Knight. Mrs Jill
Rost, Peter (SE Derbyshire)


Cooke, Robert (Bristol W)
Knox, David
Royle, Sir Anthony


Cope, John
Lamont, Norman
Sainsbury, Tim


Cormack, Patrick
Langford-Holt, Sir John
Scott, Nicholas


Corrie, John
Latham, Michael (Melton)
Scott-Hopkins, James


Costain, A. P.
Lawrence, Ivan
Shaw, Giles (Pudsey)


Crawford, Douglas
Lawson, Nigel
Shaw, Michael (Scarborough)


Dean, Paul (N Somerset)
Le Marchant, Spencer
Shelton, William (Streatham)


Dodsworth Geoffrey
Lester, Jim (Beeston)
Shepherd, Colin


Drayson, Burnaby
Lewis, Kenneth (Rutland)
Shersby, Michael


du Cann, Rt Hon Edward
Lloyd, Ian
Silvester, Fred


Durant, Tony
Loveridge, John
Sims, Roger


Dykes, Hugh
Luce, Richard
Sinclair, Sir George


Edwards, Nicholas (Pembroke)
MacCormick, Iain
Skeet, T. H. H.


Evans, Gwynfor (Carmarthen)
McCrindle, Robert
Smith, Dudley (Warwick)


Ewing, Mrs Winifred (Moray)
Macfarlane, Neil
Smith, Timothy John (Ashfield)


Eyre, Reginald
MacGregor, John
Speed, Keith


Fairbairn, Nicholas
Ma-Kay, Andrew (Stechford)
Spence, John


Fairgrieve, Russell
Macmillan, Rt Hon M. (Farnnam)
Spicer, Jim (W Dorset)


Farr, John
McNair-Wilson, M. (Newbury)
Spicer, Michael (S Worcester)


Fell, Anthony
McNair-Wilson, P. (New Forest)
Sproat, Iain


Finsberg, Geoffrey
Madel, David
Stalnton, Keith


Fisher, Sir Nigel
Marshall, Michael (Arundel)
Stanbrook, Ivor


Fletcher, Alex (Edinburgh N)
Marten, Neil
Stanley, John


Ftetcher-Cooke, Charles
Mates, Michael
Steen, Anthony (Wavertree)


Forman, Nigel
Mather, Carol
Stewart, Rt Hon Donald


Fox, Marcus
Maude, Angus
Stewart, Ian (Hitchin)


Fraser, Rt Hon H. (Stafford &amp; St)
Maxwell-Hyslop, Robin
Stokes, John


Galbraith, Hon T. G. D.
Meyer, Sir Anthony
Stradling Thomas, J.


Gardiner, George (Reigate)
Miller, Hal (Bromsgrove)
Tapsell, Peter


Gardiner, Edward (S Fylde)
Mills, Peter
Taylor, R. (Croydon NW)


Gilmour, Sir John (East Fife)
Miscampbell, Norman
Taylor, Teddy (Cathcart)


Glyn, Dr Alan
Mitchell, David (Basingstoke)
Tebbit, Norman


Goodhart, Philip
Moate, Roger
Temple-Morris, Peter


Goodlad, Alastair
Monro, Hector
Thatcher, Rt Hon Margaret


Gorst, John
Montgomery, Fergus
Thomas, Rt Hon P. (Hendon S)


Gow, Ian (Eastbourne)
Moore, John (Croydon C)
Thompson, George

Question put: That the amendment be made to the proposed clause:—

The House divided: Ayes 248, Noes 259.

Townsend, Cyril D.
Walters, Dennis
Wilson, Gordon (Dundee E)


van Straubenzee, W. R.
Warren, Kenneth
Winterton, Nicholas


Vaughan, Dr Gerard
Watt, Hamish
Young, Sir G. (Ealing, Acton)


Viggera, Peter
Weatherill Bernard
Younger, Hon George


Wakeham, John
Wells, John



Walder, David (Clitheroe)
Whitelaw, Rt Hon William
TELLERS FOR THE AYES:


Walker, Rt Hon P. (Worcester)
Wiggin, Jerry
Mr. Anthony Berry and


Walker-Smith, Rt Hon Sir Derek
Wigley, Dafydd
Lord James Douglas-Hamilton.


NOES


Abse, Leo
Evans, Ioan (Aberdare)
MacKenzie, Rt Hon Gregor


Allaun, Frank
Evans, John (Newton)
McNamara, Kevin


Anderson, Donald
Ewing, Harry (Stirling)
Madden, Max


Archer, Rt Hon Peter
Faulds, Andrew
Magee, Bryan


Armstrong, Ernest
Fernyhough, Rt Hon E.
Mallalieu, J. P. W.


Ashley, Jack
Fitch, Alan (Wigan)
Marks, Kenneth


Ashton, Joe
Fiannery, Martin
Marshall, Dr. Edmund (Goole)


Atkins, Ronald (Preston N)
Fletcher, Tea (Darlington)
Marshall, Jim (Leicester S)


Atkinson, Norman (H'gey Tott'ham)
Foot, Rt Hon Michael
Mason, Rt Hon Roy


Bagier, Gordon A. T.
Fraser, John (Lambeth, N'w'd)
Maynard, Miss Joan


Barnett, Guy (Greenwich)
Freeson, Rt Hon Reginald
Meacher, Michael


Barnett, Rt Hon Joel (Heywood)
Garrett, John (Norwich S)
Mellish, Rt Hon Robert


Bates, Alt
Garrett, W. E. (Wallsend)
Mikardo, Ian


Benn, Rt Hon Anthony Wedgwood
George, Bruce
Millan, Rt Hon Bruce


Bennett, Andrew (Stockport N)
Gilbert, Rt Ron Dr John
Miller, Dr M. S. (E Kilbride)


Bidwell, Sydney
Ginsburg, David
Mitchell, Austin (Grimsby)


Bishop, Rt Hon Edward
Golding, John
Mitchell, R. C. (Soton, Itchen)


Blenkinsop, Arthur
Gould, Bryan
Molloy, William


Booth, Rt Hon Albert
Gourlay, Harry
Moonman, Eric


Boothroyd, Miss Betty
Graham, Ted
Morris, Alfred (Wythenshawe)


Bottomley, Rt Hon Arthur
Grant, John (Islington C)
Morris, Rt Hon J. (Aberavon)


Boyden, James (Bish Auck)
Grimond, Rt Hon J.
Moyle, Rt Hon Roland


Bradley, Tom
Grocott, Bruce
Murray, Rt Hon Ronald King


Bray, Dr Jeremy
Hamilton, W. W. (Central Fife)
Newens, Stanley


Brown, Hugh D. (Provan)
Hardy, Peter
Noble, Mike


Brown, Robert C. (Newcastle W)
Harrison, Rt Hon Walter
Oakes, Gordon


Brown, Ronald (Hackney S)
Hart, Rt Hon Judith
Ogden, Eric


Buchan, Norman
Hattersley, Rt Hon Roy
Orbach, Maurice


Buchanan, Richard
Hayman, Mrs Helene
Orme, Rt Hon Stanley


Callaghan, Jim (Mlddleton &amp; P)
Healey, Rt Hon Denis
Ovenden, John


Campbell, Ian
Heffer, Eric S.
Owen, Rt Hon Dr David


Canavan, Dennis
Hooley, Frank
Palmer, Arthur


Carmichael, Neil
Horam, John
Pardoe, John


Carter, Ray
Howell, Rt Hon Denis (B'ham, Sm H)
Park, George


Carter-Jones, Lewis
Howells, Geraint (Cardigan)
Pavitt, Laurie


Cartwright, John
Hoyle, Doug (Nelson)
Pendry, Tom


Clemitson, Ivor
Huckfleld, Les
Perry, Ernest


Cocks, Rt Hon Michael (Bristol S)
Hughes, Mark (Durham)
Phipps, Dr Colin


Cohen, Stanley
Hushes. Robert (Aberdeen N)
Powell, Rt Hon J. Enoch


Coleman, Donald
Hughes, Roy (Newport)
Prescott, John


Concannon, Rt Hon John
Hunter, Adam
Price, C. (Lewisham W)


Cook, Robin F. (Edin C)
Irvine, Rt Hon Sir A. (Edge Hill)
Price, William (Rugby)


Corbett, Robin
Irving, Rt Hon S. (Dartford)
Radice, Giles


Cox, Thomas (Tooting)
Jackson, Colin (Brighouse)
Rees, Rt Hon Merlyn (Leeds S)


Craigen, Jim (Maryhill)
Jackson, Miss Margaret (Lincoln)
Richardson, Miss Jo


Crawshaw, Richard
Janner, Greville
Roberts, Albert (Normanton)


Cronin, John
Jay, Rt Hon Douglas
Roberts, Gwilym (Cannock)


Crowther, Stan (Rotherham)
Jeger, Mrs Lena
Robertson, George (Hamilton)


Cunningham, G. (Islington S)
Jenkins, Hugh (Putney)
Robinson, Geoffrey


Cunningham, Dr J. (Whiteh)
John, Brynmor
Roderick, Caerwyn


Dalyell, Tam
Johnson, James (Hull West)
Rodgers, George (Chorley)


Davidson, Arthur
Johnson, Walter (Derby S)
Rodgers, Rt Hon William (Stockton)


Davies, Bryan (Enfield N)
Jones, Alec (Rhondda)
Rooker, J. W.


Davies, Rt Hon Denzil
Jones, Dan (Burnley)
Roper, John


Davies, Ifor (Gower)
Kaufman, Rt Hon Geraid
Rose, Paul B.


Davis, Clinton (Hackney C)
Kelley, Richard
Ross, Stephen (Isle of Wight)


Deakins, Eric
Kerr, Russell
Ross, Rt Hon W. (Kilmarnock)


Dean, Joseph (Leeds West)
Kilroy-Silk, Robert
Rowlands, Ted


de Freitas, Rt Hon Sir Geoffrey
Kinnock, Neil
Ryman, John


Dell, Rt Hon Edmund
Lanbie, David
Sandelson, Neville


Dempsey, James
Lamond, James
Sedgemore, Brian


Dewar, Donald
Latham, Arthur (Paddington)
Sever, John


Doig, Peter
Leadbitter, Ted
Shaw, Arnold (llford South)


Dormand, J. D.
Lestor, Miss Joan (Eton &amp; Slough)
Sheldon, Rt Hon Robert


Douglas-Mann, Bruce
Lever, Rt Hon Harold
Shore, Rt Hon Peter


Dunnett, Jack
Lewis, Ron (Carlisle)
Silkin, Rt Hon S. C. (Dulwich)


Dunwoody, Mrs Gwyneth
Loyden, Eddie
Silverman, Julius


Eadie, Alex
Luard, Evan
Skinner, Dennis


Edge, Geoff
Lyons, Edward (Bradford W)
Smith, Rt. Hon. John (N Lanarkshire)


Edwards, Robert (Wolv SE)
Mabon, Rt Hon Dr J. Dickson
Snape, Peter


Ellis, John (Brigg &amp; Scun)
McCartney, Hugh
Spearing, Nigel


Ellis, Tom (Wrexham)
McDonald, Dr Oonagh
Spriggs, Leslie


Evans, Fred (Caerphilly)
McGuire, Michael (Ince)
Stewart, Rt Hon M. (Fulham)

Stoddart, David
Tomney, Frank
Willey, Rt Hon Frederick


Stott, Roger
Torney, Tom
Williams, Rt Hon Shirley (Hertford)


Strang, Gavin
Tuck, Raphael
Williams, Sir Thomas (Warrington)


Strauss. Rt Hon G. R.
Urwln, T. W.
Wilson, Rt Hon Sir Haroid (Huytor)


Summerskill, Hon Dr Shirley
Walker, Harold (Doncaster)
Wilson, William (Coventry SE)


Swain, Thomas
Walker, Terry (Kingswood)
Wise, Mrs Audrey


Taylor, Mrs Ann (Bolton W)
Watkins, David
Woodall, Alec


Thomas, Mike (Newcastle E)
Watkinson, John
Woof, Robert


Thomas, Ron (Bristol NW)
Weetch, Ken
Wriggiesworth, Ian


Thorne, Stan (Preston South)
Weitzman, David
Young, David (Bolton E)


Thorpe, Rt Hon Jeremy (N Devon)
Wellbeloved, James



Tierney, Sydney
White, Frank R. (Bury)
TELLERS FOR THE NOES:


Tiley, John
White, James (Pollok)
Mr, James Hamilton and


Tinn, James
Whitehead, Phillip
Mr. A. W. Staliard.


Tomlinson, John
Whitlock, William

Question accordingly negatived.

Clause added to the Bill.

New Clause No. 49

SCHEDULE D DEDUCTION OF PAYMENTS TO TRUSTEES

"(1) Any sum expended by the company concerned or, in the case of a group scheme, by a participating company in making a payment to the trustees of an approved scheme shall be included—

(a) in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by that company, or
(b) if that company is an investment company within the meaning of section 304 of the Taxes Act or a company in the case of which that section applies by virtue of section 305 of that Act, in the sums to be deducted as expenses of management in computing the profits of the company for the purposes of corporation tax,
if, and only if, one of the conditions in subsection (2) below is fulfilled.

(2) The conditions referred to in subsection (1) above are—

(a) that before the expiry of the relevant period the sum in question is applied by the trustees in the acquisition of shares for appropriation to individuals who are eligible to participate in the scheme by virtue of their being or having been employees or directors of the company making the payment; and
(b) that the sum is necessary to meet the reasonable expenses of the trustees in administering the scheme.

(3) For the purposes of subsection (2)(a) above, 'the relevant period' means the period of nine months beginning on the day following the end of the period of account in which the sum in question is charged as an expense of the company incurring the expenditure or such longer period as the Board may allow by notice in writing given to that company.

(4) For the purposes of this section, the trustees of an approved scheme shall be taken to apply sums paid to them in the order in which the sums are received by them.".—[Mr. Robert Sheldon.]

Brought up, and read the First time.

5.15 p.m.

Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Oscar Murton): It will be convenient to take at the same time the following Government amendments:
No. 86, in schedule 8, page 74, line 14, at end insert—
(1A) Where the company concerned has control of another company or companies, the scheme may he expressed to extend to all or any of the companies of which it has control; and in this Schedule a scheme which is expressed so to extend is referred to as a 'group scheme' and, in relation to a group scheme, the expression participating company' means the company concerned or a company of which for the time being the company concerned has control and to which for the time being the scheme is expressed to extend.".
NO. 159, in clause 49, page 45, line 27, at end insert
'group scheme' and, in relation to such a scheme, 'participating company' have the meaning assigned by paragraph 1(1A) of that Schedule".

Mr. Sheldon: This new clause has been tabled to make clear the situation concerning the deductibility for corporation tax purposes of money spent by companies on profit sharing under the approved schemes made available to them in the Finance Bill of this year.
The hon. Member for Norfolk, South (Mr. MacGregor), the CBI and others have asked for clarification as to the precise circumstances under which deductions are allowable under the schedule D rules. The purpose of the clause is to make clear what the rules are.
In subsection (2) we have specified two conditions to enable sums to qualify for deduction. First, the sums must be used to purchase shares within nine months of the end of the accounting period. Second, the amounts paid must be the amounts necessary to meet the reasonable expenses of the trustees.
Amendment no. 86 relates to group schemes. We shall come to a number of others in due course. It provides that if a company which establishes a profit-sharing scheme controls another company or companies, its scheme or schemes can extend to all or any of its subsidiaries. This was done in response to representations in Committee and from outside. Amendment no. 159 is drafting and consequential.

Mr. John MacGregor: I am in this somewhat unaccustomed position on the Front Bench because I handed the profit-sharing clauses for the Opposition in Committee and put forward the substance of these amendments. I am grateful to the Financial Secretary for meeting his commitments and bringing them forward. There are several other related amendments later.
This whole scheme has been much improved by our Committee debates and by the efforts of the Conservative Party, supported sometimes by the Liberals. We should still like more generous tax reliefs, and we shall come to that matter later.
We are pleased with the drafting of new clause no. 49. It meets our fundamental point about expenses, on which companies were in a good deal of uncertainty. The time limit also is reasonable, although we may wish later to extend the relevant period in the light of how it works. We shall want to monitor the extra nine months after the end of the financial year.
Subsection (3) gives the Revenue flexibility to allow a longer period in notice in writing given to the company. It may not always be possible, perhaps because of market conditions, for companies to appropriate shares exactly when the trustees may wish. We may need the flexibility and I hope that the Revenue will use it.
Amendment no. 86 meets the point made firmly in Committee and which worried many companies that might wish to introduce these schemes—that the administrative complexities would be enormous if they were to have separate schemes for every subordinate company within a holding company or group. The amendment makes possible a single scheme for a group. We are glad of these

changes, which remove some difficulties and restrictions.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause No. 51

REPAYMENT OF TAX PAID UNDER POLICE REGULATIONS

'(1) The Board shall repay to police authorities any tax paid by those authorities by reason of the regulations mentioned in subsection (2) below which required police authorities to discharge any tax liability of members of police forces arising in consequence of the provision of free accommodation); and no person other than a police authority shall be entitled to any repayment or credit in respect of tax paid as aforesaid unless he has made an application in that behalf to the Board or an inspector before the coming into force of this section.

(2) The regulations referred to above are—

(a) Regulation 30A of the Police Regulations 1952;
(b) Regulation 40A of the Police (Scotland) Regulations 1956;
(c) any regulation subsequently in force and corresponding to either of those mentioned above.

(3) Subsection (1) above shall also apply to tax paid by the Ministry of Home Affairs for Northern Ireland or the Police Authority for Northern Ireland by reason of Article 8A of the Royal Ulster Constabulary Allowances (Rent and Compensatory Grant) Order 1963 or of any corresponding provision subsequently in force, but any tax so paid by the Ministry shall be repaid to the Authority.

(4) This section shall be deemed to have come into force on 7th July 1978.'.—[Mr. Robert Sheldon.]

Brought up, and read the First time.

Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.
This follows the decision of the High Court in 1976 in the case of Langley v. Appleby that the provision of living accommodation for police officers does not result in liability to tax. Under police regulations, the police authorities have been liable to payment of tax arising from the provision of living accommodation for their officers. Now that the court has held that such tax is not due, repayments will need to be made to those who paid the tax. It is anomalous that because the tax was paid on behalf of the police officers, it is only they, who have not


paid the tax, who in law can claim the repayment. The clause puts right an omission in the original regulations and ensures that the tax will be repaid to those who paid it.

Mr. MacGregor: We welcome the new clause, although it is odd that it was not dealt with earlier, since it was clear that it would he necessary. As the new clause was put down late, we have not been able to take outside representations into account. However, it seems fairly straightforward.
Did any other groups, in the public or private sector, have to face tax on their job-related accommodation and might they need a similar provision? Or is this problem peculiar to the police because it was the local authorities which paid the tax?
Since we were among those urging that job-related accommodation should be dealt with in this way, we have no wish to oppose the new clause.

Mr. Anthony Nelson: I, too, welcome the new clause. Subsection (4) says that it will come into force on 7th July 1978. Has any estimate been made in the Treasury of the amount which will be repaid?

Mr. Robert Sheldon: In answer to the hon. Member for Norfolk, South (Mr. MacGregor), a private employer obviously could provide living accommodation for his employees. What is clearly exceptional and distinguishes the treatment we seek to give the police authorities is that they were under a statutory obligation to pay the tax, and the courts have relieved them of that necessity. Our estimate is that the sum involved is up to £20 million, with possibly something extra for interest.

Mr. MacGregor: Are there any companies in the private sector which may have had similar arrangements and whose employees therefore will not get this retrospective tax benefit? Or does this apply only to police authorities?

Mr. Sheldon: I am sorry that I do not have any knowledge of what arrangements were made by individual companies, but that surely is not the point at issue. The police authorities were instructed by statute to act in this way. The recent court case showed that there

was a difference between the original interpretation and what the courts actually found. Therefore, tax refunds must be made available to the police authorities. There is no comparable situation in the private sector.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause No. 52

DEDUCTION RATE FOR SUB-CONTRACTORS IN THE CONSTRUCTION INDUSTRY

'Section 69(4) of the Finance (No. 2) Act 1975 (which requires deductions to be made from payments to certain sub-contractors in the construction industry) shall have effect in relation to payments made on or after 6th November 1978 with the substitution for the words "34 per cent." of the words "33 per cent.".'—[Mr. Robert Sheldon.]

Brought up, and read the First time.

5.30 p.m.

Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.
This new clause reduces the deduction to be made from sub-contractors without certificates from 34 per cent. to 33 per cent. This follows from the Committee stage amendment which reduced the basic rate from 34 per cent. to 33 per cent. The new clause is consequential on it.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause No. 63

VEHICLES EXCISE DUTY: GREAT BRITAIN

'(1) For section 7(2) of the Vehicles (Excise) Act 1971 there shall be substituted—

"(2) A mechanically propelled vehicle shall not be chargeable with any duty under this Act by reason of its use by or for the purposes of a person ('a disabled person') suffering from a physical defect or disability or by reason of its being kept for such use if—

(a) it is registered under this Act in the name of that person; and
(b) he has obtained, or is eligible for, a grant under paragraph 2 of Schedule 2 to the National Health Service Act 1977 in relation to that vehicle or is in receipt of a mobility allowance; and
(c) no other vehicle registered in his name under this Act is exempted from


duty under this subsection or section 7 of the Finance Act 1971;
and for the purposes of this subsection a vehicle shall be deemed to be registered in the name of a disabled person in receipt of a mobility allowance if it is registered in the name of a person appointed pursuant to regulations under the Social Security Act 1975 to exercise any of his rights or powers or in the name of a person nominated for the purposes of this subsection by the disable person or by a person so appointed.".

(2) So much of section 13 of the Finance Act 1976 as excludes a person entitled to a mobility allowance from the exemption from duty conferred by section 7 of the Finance Act 1971 shall cease to have effect.

(3) In section 7 of the Finance Act 1971 after paragraph (c) there shall be inserted the words "and—
(d) no vehicle exempted from duty under section 7(2) of the Vehicles (Excise) Act 1971 is (or by virtue of that provision is deemed to be) registered in his name under that Act.".

(4) Section 26(1)(c) of the Vehicles (Excise) Act 1971 (offences in respect of licence etc.) shall apply also to any document in the form of a licence which in pursuance of regulations made under that Act is issued in respect of a vehicle exempted from duty under the provisions mentioned in subsections (1) and (3) above; and section 26(2)(a) of that Act (false declarations in connection with applications for a licence) shall apply also in relation to any declaration required by any such regulations to be made in respect of any vehicle so exempted.

(5) This section shall come into force on 1st December 1978.'.—[Mr. Robert Sheldon.]

Brought up, and read the First time.

Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this we may also discuss the following:

Amendment (b), leave out '1st December' and insert '1st September'.

New Clause No. 64

VEHICLES EXCISE DUTY: NORTHERN IRELAND

'(1) For section 7(2) of the Vehicles (Excise) Act (Northern Ireland) 1972 there shall be substituted—

"(2) A mechanically propelled vehicle shall not be chargeable with any duty under this Act by reason of its use by or for the purposes of a person ('a disabled person') suffering from a physical defect or disability or by reason of its being kept for such use if—

(a) it is registered under this Act in the name of that person; and

(b) he has obtained, or is eligible for, a grant under Article 30(3) of the Health and Personal Social Services (Northern Ireland) Order 1972 in relation to that vehicle or is in receipt of a mobility allowance; and
(c) no other vehicle registered in his name under this Act is exempted from duty under this subsection or subsection (2A);
and for the purposes of this subsection a vehicle shall be deemed to be registered in the name of a disabled person in receipt of a mobility allowance if it is registered in the name of a person appointed pursuant to regulations under the Social Security (Northern Ireland) Act 1975 to exercise any of his rights or powers or in the name of a person nominated for the purposes of this subsection by the disabled person or by a person to appointed.

(2) So much of section 13 of the Finance Act 1976 as excludes a person entitled to a mobility allowance from the exemption from duty conferred by section 7(2A) of the said Act of 1972 shall cease to have effect.

(3) In the said section 7(2A) after paragraph (b) there shall be inserted the words "and
(c) no vehicle exempted from duty under subsection (2) is (or by virtue of that subsection is deemed to be) registered in his name under this Act.

(4) Section 26(c) of the said Act of 1972 (offences in respect of licence etc.) shall apply also to any document in the form of a licence which in pursuance of regulations made under that Act is issued in respect of a vehicle exempted from duty under section 7(2) or (2A) of that Act.

(5) This section shall come into force on 1st December 1978.'.

Amendment (d) to new clause no. 64, leave out '1st December' and insert '1st September'.

New Clause No. 61

AMENDMENT OF SECTION 13 OF THE FINANCE ACT 1976

'Section 13 of the Finance Act 1976 shall cease to have effect from such date as the Treasury may by order prescribe, being a date not later than 31st December 1978, and in section 7(2)(b) of the Vehicles Excise Act 1971 after the words "vehicle" there shall be inserted the words "or a mobility allowance under section 37A of the Social Security Act 1975,".'.

Government amendments nos. 132 to 135.

Mr. Sheldon: This new clause deals with Great Britain while new clause no. 64 deals with Northern Ireland; together they meet the undertaking I gave in Committee to my hon. Friends the Members for Lichfield and Tamworth (Mr. Grocott) and Rossendale


(Mr. Noble) and the hon. Member for Braintree (Mr. Newton) to exempt those receiving the mobility allowance from the vehicle excise duty.
The new clause also provides exemption for vehicles registered in the name of a nominee of a disabled person. Before July 1976, there was no mobility assistance except for those who ran a car, the trike. Since 1976 we have introduced improvements in mobility allowances, and as from this month the allowance is being increased to £10 a week.
Implementation of the undertaking I gave in Committee will take effect as from 1st December of this year. I regret this delay caused by the problems faced by the Department of Health and Social Security in producing exemption certificates. These are used by disabled people in applying for the excise licence. The Department needs to identify from its computer records the names and addresses of those who receive mobility allowances. The Department has a number of other problems which have caused the delay, which I regret. I am assured by the Department of Health and Social Security that 1st December 1978 is the earliest date by which it can implement the decision I announced in Committee.
I believe that the new clause will be well received and I ask the House to accept it.

Mr. Newton: I was responsible for exerting some of the pressure in Committee which has resulted in this new clause being brought forward. I repeat what I said in Committee. This is a very welcome move indeed to all who are concerned with the interests and problems of the disabled. I say that without qualification. I wish to raise a number of queries and to refer briefly to my amendment (b). I ask the Financial Secretary for elucidation on some of the points arising from this proposal.
I refer specifically to the question of the date on which the proposal comes into force. I apologise in that, because of the, speed at which the business has progressed, I did not hear the whole of the Financial Secretary's remarks. He may already have dealt with this point. I do not immediately see why this proposal should be delayed until 1st December. It does not seem to be an enormously complex administrative problem to iden-

tify these people. After all, we have an elaborate and allegedly sophisticated computer complex at Swansea which masterminds our vehicle excise duty system. Unless it has been subject to yet another failure in addition to the many that we have already experienced, I do not believe that it would be impossible for the computer to cope with this task rather faster than the new clause provides and the Financial Secretary has suggested.
Amendment (d) is tabled as a probing amendment but we shall certainly require considerable justification for delaying this important concession until the end of the year rather than introducing it earlier—I have suggested 1st September.
I emphasised the importance and urgency of this new clause. The background to it is not simply a general desire on both sides of the House to be as generous as we can to the disabled. It arises, as I argued at some length in proposing my own new clause in Committee, out of the doubt whether the Motability scheme can get properly off the ground unless some additional financial support is channelled into it by some such means as this. It appears that there is virtually no car which can be put on the road for the £10 a week at which the mobility allowance now stands, even with all the advantages of the Motability leasing scheme. Unless we ensure that this scheme is fully implemented we shall not merely fail to improve the position of many disabled people who currently have trikes but are moving over to the mobility allowance, but we shall make the situation worse for those who have been mobile, because there will be an inadequate mobility allowance with which they cannot properly run, license and insure a car. These people will be driven off the road and lose the mobility which they already have. We shall require the Financial Secretary to prove that this task of implementing the new clause cannot be done before 1st December.
There is one other major issue I wish to raise so that the Minister may give a specific assurance. I refer to the way in which this exemption will work for disabled people who are not drivers. I have had one or two letters on this point and one in particular from a constituent of my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton), which I have passed on to him. This letter is


from a man who was given a private car allowance under one of the old schemes. He was sent a form for claiming vehicle excise duty exemption. After applying for the exemption it was made clear to him that he could benefit from it only if he was in the car on every occasion when it was used.
This man has written to me pointing out that it seems that if he failed always to go out in the car when his wife was driving it he would not qualify for the exemption. He points out that he does not necessarily want to go out with her every time that she does the shopping. Accordingly, he reached the conclusion that the exemption was not worth applying for and would do more harm than good.
If that is the case with the old vehicle excise duty exemption scheme, I would like an assurance that this new scheme would be a great deal more flexible. That is why I sought, in amendment (a) to new clause no. 63 which has not been selected, to insert the word "substantially" in the proposed new section 7(2) of the Vehicles (Excise) Act 1971. The purpose of the amendment was to enable me to probe this point. Can we be absolutely clear and have it firmly on the record that this exemption will apply to vehicles which are not necessarily to be driven by the disabled person, that the vehicles do not have to be used only for the purposes of the disabled person?

Mr. Lewis Carter-Jones: New clause no. 63 makes this perfectly clear in my opinion when it speaks of a vehicle being used
by or for the purposes of
a disabled person. That does not of necessity involve the driver.

Mr. Newton: I think that that is probably right, but in view of the correspondence that I have had, and because of the problems that have been reported to me, I can say no more at this stage. It is right that we should make sure that these points are firmly on the record.
I rather agree with the hon. Member that it is quite clear from the clause that the disabled passenger is covered. I am less certain whether there is any risk at all of an administrative decision which says, in effect, that the car has to be used

only for the purposes of the disabled passenger, or whether it could be argued—as apparently it has in other cases—that, if the disabled passenger is not always in the car, the exemption does not arise. That would seem to me to be an odd and, indeed, a ridiculous situation, but it has been quite specifically reported to me in relation to another aspect of vehicle excise duty exemption. I know from other letters that I have received that there is concern about disabled passengers. I feel that the Minister should be asked to make the matter absolutely and categorically clear, if only to remove any anxieties which may exist outside the House.
That is as much as I should like to say, Mr. Deputy Speaker. It may be that other hon. Members will wish to make a broader case as to how much more we need to do even now to relieve the tax burden on vehicles for disabled people, and not least to try to remove some of the remaining problems of the Motability scheme. At least with the new clause we have gone some way. We have gained an important concession, and it is right that everyone should welcome it this afternoon.

Mr. J. Enoch Powell: In order to avoid any separate debate on new clause no. 64, Mr Deputy Speaker, perhaps I may say in this short debate that the concession is no less welcome in Northern Ireland than in the rest of the United Kingdom. It may appear to hon. Members to be clumsy—and, indeed, it is clumsy—that we have to have a separate clause to produce the same effect in Northern Ireland, because vehicle excise was a subject on which of yore the Parliament of Northern Ireland legislated.
I dare say, however, since vehicle excise duty must be uniform throughout the United Kingdom—and, indeed, has been kept uniform by convention—that we shall in due course get round to legislating on that subject for the whole of the United Kingdom, and that will make for avoidance of the sort of additional clause which is necessary to achieve the beneficent purpose in this case.

Mr. Mike Noble: I intend to be very brief, Mr. Speaker. I wish to thank my right hon. Friend and his colleagues in the Treasury for carrying out


the assurance which they gave us in Committee that a Government clause of this kind would be brought forward to deal with this problem.
If I have a criticism of the clause, it would be with regard to the starting date. I think that it would be a shame to spoil the ship for a ha'porth of tar and to hold back this substantial benefit to many people in greatest need simply for perhaps, administrative purposes. I hope that, even at this late date, my right hon. Friend will re-examine the position and see whether there is any way in which the starting date for this benefit can be brought forward.
I was pleased to note the comments of my hon. Friend the Member for Eccles (Mr. Carter-Jones) about the Bill. I know that he is an expert in this matter and I accept his assurances, as well as my right hon. Friend's assurances, that with regard to non-drivers the interpretation of the clause will be as wide as possible.
I, too, have had letters about this matter, and some of my constituents have expressed some anxiety about the position of non-drivers. More requires to be done in this respect. A significant feature of the post that I have received concerning the clause has been that it has inserted the kind of boundary line that we have for old people with regard to television licences. The only way to get rid of that boundary is by constantly pushing it outwards and bringing more and more people into the net. I hope that we shall see the proposal as a start on that process rather than as an end process.
I listened with care to the remarks of the hon. Member for Braintree (Mr. Newton). As I said in Committee, I accept entirely his sincerity in speaking on behalf of the disabled and other disadvantaged groups. I know the amount of work that he has done for them. But I am worried when I hear Opposition Members carping and saying that a £10 mobility allowance will not put a car on the road. After all, the mobility allowance was brought in by this Government, not by a Conservative Government, and £10 is a very substantial benefit indeed. It has enabled many people, who would otherwise never get out of their homes, to get outside and to take jobs and enter into the social activities of the community.
5.45 p.m.
As I pointed out to the hon. Gentleman in Committee, I do not doubt his sincerity, and I do not doubt that he, whether in Government or Opposition, will press the case for the disabled, but my doubt is whether his party, should it ever become the party of Government, would, despite the efforts of the hon. Gentleman, sustain the momentum in improving facilities for the disabled which has been so substantially created by this Government. But welcome the clause.

Mr. Paul Channon: I do not want to get into an argument with the hon. Member for Rossendale (Mr. Noble) as to which party is likely to do more for the disabled. I think there is a keen determination on each side of the House to do the utmost for the disabled, and I am sure that that will be a continuing factor of our public life, whichever party is in office at any particular moment.
I merely rise to say, Mr. Deputy Speaker, that I, too, welcome the new clause, but I have a number of queries arising out of specific constituency cases which have been put to me. I ask the Financial Secretary to give some answers, if he can, to the questions which have been put to me, because there is still a very great deal of confusion on the part of my constituents as to what is to happen.
I should like first to deal with the point raised by my hon. Friend the Member for Braintree (Mr. Newton) about disabled passengers. I do not know what the law is at present, but, if there is any difficulty about it, this new clause will not change it, because the wording of the relevant section of the Finance Act 1972, which copies the earlier Acts dealing with this point, is precisely the is any difficulty about it, this new clause If there have been problems in the past, they are continued today, because there is no change in the wording. It would be very helpful if the Financial Secretary could tell the House what is the position in regard to disabled passengers and disabled people who on occasion do not drive the vehicle themselves.
I should like next to deal with the point raised with me by a number of my constituents who have come to see me about it. They are at present holders of the private car allowance. On 5th July


they will transfer to the mobility allowance. One of the features of the mobility allowance, until the new clause becomes law, is that those who receive it are not exempt from vehicle excise duty. I am told that on 5th July, therefore, about 17,000 people who change from the private car allowance to the mobility allowance will have to pay vehicle excise duty from 5th July until 1st December.
Perhaps the Financial Secretary will tell us how this is to be operated from now on. It seems to be a ridiculous state of affairs that for a few months these people will have to pay vehicle excise duty and go through the mechanics of surrendering the discs they may have at present, paying vehicle excise duty for a number of months, and then afterwards becoming exempt.
I understand that the issue of the order books for mobility allowance will have to be staggered—the Minister with responsibility for the disabled will know far more about this than anybody else—because it is difficult to send out 17,000 books at once. What will happen in the case of those who find it difficult to meet the lump sum payment which they will have to make in order to take out a vehicle excise licence? Am I right in thinking that they will now need to take out the licence only for the period to 1st December, and that it would be quite wrong for them to take out an annual licence? Am I right in thinking that the best advice to them is to take out a three-month licence and to renew it in October? But in any event it is asking a lot of a disabled person to go through this rigmarole when on 1st December he will be exempt from vehicle excise duty.
Would it not be very much simpler if some mechanism could be found to enable these people to be exempted straight away? If such a mechanism cannot be found, could not the provision be made retrospective from 1st December to the relevant date? The people involved will have to go through a great deal of inconvenience, and a fair amount of cost to them will also arise. I know of some cases in which it would be very difficult for the people concerned to find the lump sum which it would be necessary for them to pay for the vehicle excise duty prior to receiving their mobility allowance book.
It would be most helpful if the Financial Secretary could tell us what the position of these people is, how they are to be helped by the Government and what administrative action is now to be taken in the light of this new clause. I urge the Financial Secretary to heed the voices of his hon. Friends, as well as of Opposition Members, and, if he can, to introduce this exemption at an earlier date. If that is not possible, I hope that he will at least back-date the concession so that those concerned will get a refund on 1st December for the money which they will have to spend at the present time.

Mr. Carter-Jones: I shall be brief. I should like to refer to the speech of the right hon. Member for Down, South (Mr. Powell). He pointed out that new clause no. 63 and new clause no. 64 were separate because of the Northern Ireland dichotomy. I share his concern, and I hope that all sides of the House will support the efforts to get the Chronically Sick and Disabled Persons Act on to the Northern Ireland statute book, even though it is eight years late.
If that Act gets on to the statute book, the advantage is that with the scheme promoted by Outset, Northern Ireland will at least know how many disabled people live there. I hope that hon. Members will give this Bill a fair wind when it goes into Committee, and I hope that it gets a Third Reading on the nod. Perhaps we shall not have this dichotomy again.
I believe that the vehicle excise duty relief is very valuable indeed. It is crucial with regard to the margin of the buying of Motability. It may assist a substantial number of people. One intriguing anomaly which arises is that when we introduced mobility allowance it was intended for people who were not mobile to use in any way that they wanted. If they wanted to take a taxi to a shop once a week, they could spend the money in that way. There was no restriction. I hope that no hon. Member will complain that the VED grant means that they are entitled to £50 a year more. This is a crucial new clause. I hope that hon. Members will combine so that it passes without a Division.

Mr. Nelson: I should like to add my voice to the welcome which has been given to the new clause by many hon.


Members. In doing so I should like to pay a particular tribute to my hon. Friend the Member for Braintree (Mr. Newton). He has been in the vanguard of those who have been pressing for this for some time, although I am the first to recognise that it has received a large measure of support from hon. Members on all sides of the House. I am particularly pleased to see present the Minister for the disabled to give his support to this debate, as I am sure he has done to the proposals in Committee.
However, without in any way wishing to throw cold water on the new clause, I should like to sound one note of caution. It is important to point out that we are making a qualitative judgment as between classes of disabled people. As a general rule, I believe that we should aim to give priority in terms of financial assistance and relief to those in the greatest need. It is not clear that in providing this relief one is helping those disabled people who are most in need.
Like many other hon. Members, I represent a constituency with a fair share of disabled people. But perhaps because I have a particularly large section of elderly people, the number of disabled is a little higher than average. In addition, because it is a rural district, in many cases not served by bus services, there is a particular mobility difficulty for many elderly people. But the severely disabled, who are unable to have their own car or to drive it, do rely on transport provided by other means, whether commercially obtained or obtained from friends or neighbours. In these situations they will not be able to benefit from this relief.
I think I am right in saying that the cost will be about £3 million. To the extent that this is a particular relief applicable to those who will be able to use their own vehicles, and will in many cases encourage and enable them to work and provide for themselves where they might not otherwise be able to do so, I welcome the new clause. I believe that it is an exception to the general principle which I am outlining.
When my hon. Friend the Member for Braintree suggested that we might use this as an extension of the sort of relief that we provide in various other areas, whether it is to the disabled generally or to old

people, I think that there are dangers. If we are consistently to provide relief on the cost of various services, whether public transport, the provision of telephones or whatever, it seems to me that this is tackling the problem from the wrong end. Even though it may be a small amount of money when shared among the individuals concerned, I should like to see the help go into their pockets. Let people, whether disabled, elderly or whatever, who are in receipt of assistance from the Government of the day decide how they want to spend the money. Let them decide whether they want to spend it on an extra packet of cigarettes, on an extra bit of heating in their homes or on travel to the nearest town in order to go on an outing. I prefer to see choice resting in the hands of the individual rather than the State making the choice on his behalf.

Mr. Carter-Jones: One of the things which worried some of us when the mobility allowance was introduced was that it would be used as income and not for mobility. There was nothing that we could do about it. The people get the money and spend it in whichever way they like although perhaps not for what we intended. But, as I said, there was nothing that we could do about it.

Mr. Nelson: If my remarks are followed logically, that is a situation with which I do not wholly disagree. I welcome that freedom being placed in their hands. It is the selective qualitative judgment of Government or Departments in handing out reliefs of which I am suspect. I am more in favour of providing individuals, according to their disability whether age, illness or whatever, with the financial means of making the choice as to the sort of services and needs they require. Those needs will vary from area to area. I have described the special needs of the disabled in my own area.
With that slight cautionary note, which is applicable to any arguments for extensions of relief in other areas of need, I nevertheless welcome the new clause. It will not cost a great deal of money, and it will undoubtedly assist those disabled people at a time when the absolute amount of money provided by way of mobility allowance is not as high as many of us would like to see. However, we


recognise that it is as much as the Government of the day can afford to provide, and to that extent we welcome it.

Mr. Peter Brooke: I rise briefly to intervene, really following the speech of the hon. Member for Rossendale (Mr. Noble) who took part in this particular debate in Committee. On that occasion he made remarks similar to those which he has made today. The hon. Member for Rossendale, and those of us who served on the Committee, will remember that his speech was preceded by one from his hon. Friend the Member for Lichfield and Tamworth (Mr. Grocott). At that stage I thought that was a disagreeable speech. I think that the hon. Member for Lichfield and Tamworth thought so, too, because he apologised for introducing a sour note. From my own experience throughout the 80 hours on which the Committee met, I thought that was the one really disagreeable moment that we had. The hon. Member for Lichfield and Tamworth was lucky that on that occasion we were seeking to make progress rapidly in order to meet our informal commitments to the Government, and as a result he got off lightly in terms of the speech which he made.
I regret that in a way the hon. Member for Rossendale has reintroduced this note into today's debate. He referred to a comparison between the two parties and their interest in the disabled. I think I am right in saying that if one looks at the manifestos of the two major parties in the 1964 General Election, one will find that neither of them found it possible to say a word about the disabled, and that this is a cause which all of us in this House have come to much later than we should have done.

Mr. Noble: As I tried to make clear, obviously very badly, it is not a question of an attitude towards the disabled. It is an attitude towards public expenditure. It is whether the Conservative Party, with its commitment to reducing public expenditure, will be able to maintain the momentum of increasing benefits for the disabled within that kind of general environment.

Mr. Brooke: In that case I obviously owe a degree of apology to the hon. Gentleman. But he will know why I am

responding in the way that I am in the light of the debate which we had upstairs.
It seems to me very desirable, if possible, to maintain a bipartisan position in these sort of areas. When the hon. Member for Rossendale challenged my hon. Friend the Member for Braintree (Mr. Newton), I think that the hon. Gentleman should have acknowledged that my hon. Friend was genuinely seeking to improve the scheme which was under discussion.
I realise that we cannot always be bipartisan. The Minister responsible for the disabled will remember a fairly fiery scene in Westminster Hall last year when the disabled were present in strength and when we were discussing amongst other objects the trike. Obviously there will be occasions when there is fairly violent dispute between the parties on certain issues or on certain Government decisions. But I hope that we can maintain a bipartisan position, and it is unfortunate if the motivations on either side of the House are challenged on issues which are as important as this issue.

6.0 p.m.

Sir G. Howe: As other right hon. and hon. Members have done, I welcome this new clause and I join those hon. Members who have paid tribute to my hon. Friend the Member for Braintree (Mr. Newton) for the commitment which he has shown to this cause and the work which he has done, with others, to promote the case which has now been accepted by the Government.
As often happens on matters of this kind, we note the validity of the argument of my hon. Friend the Member for Chichester (Mr. Nelson), who expressed some anxiety about the value of a benefit which is tied in kind, as it were. We are always torn between the desire to increase the resources of the disabled generally and the wish to do something which is directed to a special need or qualification. Subject to that, there seems to be no one prepared to criticise this clause, and I can well understand that.
The two matters raised by my hon. Friend the Member for Braintree in my view deserve a little more attention than we have had directed to them so far. The first is the difference in the operative


date, which is the subject of his amendment, between 1st September and 1st December. He was supported by my hon. Friend the Member for Southend, West (Mr. Channon), who drew attention to the extreme desirability of getting the relief available as soon as possible and to the comparatively small number of people involved. The Minister told us about the administrative difficulties which would arise in several departments. I still find it difficult to believe that it is impossible to achieve a change of this kind, which has been in prospect for some time, by 1st September if it is the case that it extends to only 17,000 people. On the argument which has been presented to us so far, I shall be disposed to advise my right hon. and hon. Friends to support the amendment to advance the date from 1st December to 1st September.
The other matter raised by my hon. Friend the Member for Braintree about the meaning of the clause may or may not have been dealt with substantially. I was not entirely convinced that his argument had been answered when he said that the phrase
by reason of its use by or for the purposes of a person … suffering from a physical defect or disability 
was regarded as not being wide enough to cover some uses and would be made more secure by the insertion of the word "substantially". I know that that is not the amendment which has been selected, but it would be helpful if the Financial Secretary could deal with it. If some people have been challenged because of their use of vehicles of this kind for incidental shopping journeys without the disabled persons being present in the cars, that was not the intention of the House.
Although the clause has been welcomed by both sides of the House, including the hon. Member for Eccles (Mr. Carter-Jones) and the hon. Member for Rossendale (Mr. Noble), both of whom have a genuine interest in this subject, I, too, join my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) in regretting that the hon. Member for Rossendale appeared to be introducing a partisan element into the discussion of the attitude of the House towards the disabled. My recollection is that most of the new benefits which have been brought on to the statute book, especially those for the disabled, have been

generated by one Government and introduced by another. There is a kind of rolling stream, and it is a matter of chance which Government do it. Certainly the last Government played their part in this.
Of course, the hon. Member for Rossendale is entitled to express his view that a Government who are intent on being wise in their management of public expenditure—as he thinks—will not be able to do as well as he would like for those who are disabled and deserving of the help of their fellow citizens. The Opposition's answer to that is that only a Government who are prudent in their management of public expenditure and recognise the need to keep that under control will be able to restore economic stability, to conquer inflation and to restore the capacity of the economy to create the wealth out of which all benefits are provided. The hon. Member is entitled to his view, but he should not overlook the experience since the end of the war that there has been a 10 times larger growth in the average wealth of our citizens under Conservative Governments than under Labour Governments covering the same period. It is by adherence to that kind of sensible economic policy that we shall be able to do what we ought to do for the disabled as well as for everyone else in our society.
Unless the Financial Secretary has a more convincing answer to the argument about the date than that which he has so far vouchsafed and which has failed to convince my hon. Friends, I shall invite the House to divide on amendment (b).

Mr. Robert Sheldon: The right hon. and learned Member for Surrey, East (Sir G. Howe) should not be so touchy about the reasonable claim of the Government to credit for the expenditure of sums of money which the previous Government did not think fit to make available. The present Government face an Opposition who wish to reduce the level of public expenditure, and they have made no secret about it. I think that my hon. Friend the Member for Rossendale (Mr. Noble) was right to draw the distinction that he did, and I am rather surprised by the sensitiveness of the right hon. and learned Member and the hon. Member for the City of London and Westminster, South (Mr. Brooke) about what was, after all, a reasonable claim by my hon. Friend


the Member for Rossendale in respect of what this Government had done.

Mr. Carter-Jones: May I try to bring some peace into the Chamber? It is probably the all-party group and the Alf Morris Act which have enabled people not to oppose benefits for the disabled. I think that we could go a lot further. But the fact that we have been able to introduce a number of improvements and benefits since 1970 is due to a Private Member's Act, supported by both sides of the House, raising the expectations of the disabled.

Mr. Sheldon: My hon. Friend is extremely active in this area, and I know the frequent representations on these matters which he makes to me. I am grateful to him, as I know the House is. I am grateful, too, for his explanation of the wording about the use of a vehicle by another person. He was quite right to draw attention to this part of the new clause which provides that a vehicle will not be chargeable with any vehicle excise duty by reason of its use by or for the purposes of a disabled person. That is a safeguard which a disabled person has in making wider use of the vehicle than perhaps the hon. Member for Braintree (Mr. Newton) had in mind.
The wording of the new clause restricts the exemption to vehicles used exclusively by or for the purposes of a disabled person. Perhaps I can make the position doubly clear by repeating that the vehicle can be used to transport a disabled person or to do his errands. I think that that is an elaboration of the point made by my hon. Friend the Member for Eccles (Mr. Carter-Jones).

Mr. John Cope: To take an extreme example, if another member of the disabled person's family is taken ill, will the right hon. Gentleman confirm that the car cannot be used to take him to hospital even if the vehicle is driven by the disabled driver? It will not be for his purposes. It will be for the purpose of the other sick person in the family.

Mr. Sheldon: In such a case, the vehicle is used by the disabled person. If the disabled person is driving someone to hospital, presumably that is use by the disabled person. I do not agree with the hon. Gentleman's interpretation.

Mr. Newton: I am sorry to pursue this point. Perhaps I might read the sentence from a letter which put the point into my mind. I received a letter from a person in Woodbridge who has recently been awarded a private car allowance and is therefore eligible for exemption under another scheme. He says:
I accordingly applied for this at the local licensing authority—Greyfriars Ipswich—and was informed that the vehicle could only be driven by me, and that my wife, who also drives, would be unable to do so unless accompanied by me.
That may be wrong. But if it is right, this clause has been drawn differently from earlier vehicle excise duty exemption clauses. If I could have a categorical assurance from the Minister that this is wrong, all the problems would he solved.

Mr. Sheldon: I cannot do any more than repeat what I have said. It is not for me to adjudicate between what has been written to the hon. Gentleman, and what has happened between the parties concerned. What I have stated is the technical position—that the vehicle can be used to transport the disabled person or to do his errands. I think that that is clear and definitive for this purpose.

Sir G. Howe: One can well see the importance, from the point of view of the Inland Revenue, of seeing that there are some safeguards on the availability of this relief. The only thing that the House is concerned about is to be clear just how narrowly the matter is defined.
The new clause refers to
its use by or for the purposes of a person ('a disabled person')".
The Financial Secretary has said that that covers use by the disabled person driving it, or being taken as a passenger in it or it being driven for an errand on his behalf. That is a fairly narrowly confined privilege when it is being used effectively in the service of a disabled person, and could well result in the position described by my hon. Friend the Member for Braintree. The licensing office could say to the wife of a disabled person that she may not drive the vehicle save only for going about his purposes, on his behalf and in his service. If that is the intention of the clause, the House will be interested to be told that.

Mr. Sheldon: I am not sure what the right hon. and learned Member has in mind. Exemption is provided in respect of a vehicle for the disabled person. It is not a vehicle to be used by a number of people including the disabled person. The interpretation of the use of the vehicle by the disabled person is as I have described it. I believe it meets with the demands of disabled people.
The hon. Member for Southend, West (Mr. Channon) asked about those who are receiving mobility allowance in place of private car allowance, which carries vehicle excise duty exemption. Those people knew about the introduction of the mobility allowance and they welcomed it. We all know that from our postbags. They will be able, at 1st December, to get a refund for part of the licence if they take out a licence for a longer period than that which is required.
6.15 p.m.
On the implementation date—the main matter that seems to be troubling hon. Members—I was as anxious as anybody, having conceded the principle, to see implementation at the earliest possible date. We tried to get it as quickly as possible. I made some representations to the Department of Health and Social Security on this matter. The difficulty lies not with the Driver and Vehicle Licensing Centre at Swansea, but with the DHSS because it will be up to it to issue the mobility allowance recipients with certificates that will enable them to get the exemption when they send in their applications for excise licences.
The first step by the DHSS will be to identify from their computer records the names and addresses of those who receive the mobility allowance and then to circu

Division No. 255]
AYES
[6.18 p.m.


Adley, Robert
Bottomley, Peter
Clark, Alan (Plymouth, Sutton)


Altken, Jonathan
Bowden, A. (Brighton, Kemptown)
Clark, William (Croydon S)


Alison, Michael
Boyson, Dr Rhodes (Brent)
Clarke, Kenneth (Rushcliffe)


Arnold, Tom
Braine, Sir Bernard
Cockcroft, John


Atkins, Rt Hon H. (Spelthorne)
Brittan, Leon
Cooke, Robert (Bristol W)


Atkinson, David (B'mouth, East)
Brocklebank-Fowler, C.
Cope, John


Bain, Mrs Margaret
Brooke, Hon Peter
Cormack, Patrick


Baker, Kenneth
Brotherton, Michael
Corrie, John


Banks, Robert
Brown, Sir Edward (Bath)
Costain, A. P.


Bell, Ronald
Bryan, Sir Paul
Crawford, Douglas


Bendall, Vivian
Buchanan-Smith, Alick
Crouch, David


Bennett, Sir Frederic (Torbay)
Buck, Antony
Crowder, F. P.


Bennett, Dr Reginald (Fareham)
Budgen, Nick
Davies, Rt Hon J. (Knutsford)


Benyon, W.
Bulmer, Esmond
Dean, Paul (N Somerset)


Biffen, John
Butler, Adam (Bosworth)
Dodsworth, Geoffrey


Biggs-Davison, John
Carlisle, Mark
Douglas-Hamilton, Lord James


Blaker, Peter
Chalker, Mrs Lynda
Drayson, Burnaby


Body, Richard
Channon, Paul
du Cann, Rt Hon Edward


Boscawen, Hon Robert
Churchill, W. S.
Durant, Tony

late all of them to inquire whether they wish to claim the exemption in their own names or, as is allowed, to nominate someone else. The DHSS then has to prepare on special security paper certificates which will enable the mobility allowance recipient or the person he has nominated to claim the exemption. The time lag is caused by this process.

I should say something about the numbers of beneficiaries because the right hon. and learned Gentleman has made an error in his calculations. There are 100,000 prospective exemptions from vehicle excise duty—that is the number of prospective recipients of the mobility allowance. Our estimate is that there will be about 70,000 who will claim VED exemption.

There will be very substantial numbers of claims, not all in the names of those claiming the mobility allowance. It is right to take from the DHSS its assessment of the delay needed to implement the scheme. I wish the scheme could be introduced sooner, but the clause takes account of the advice that we have received. Despite pressure to introduce it earlier, the DHSS says it is unable to do so. Therefore, I ask the House to accept the new clause.

Question put and agreed to.

Clause read a Second time.

Amendment (b) proposed to the proposed clause, in subsection (5), leave out '1st December' and insert '1st September'.[Mr. Newton.]

Question put, That the Amendment be made:—

The House divided: Ayes 256, Noes 274.

Dykes, Hugh
Lamont, Norman
Ridsdale, Julian


Edwards, Nicholas (Pembroke)
Langford-Holt, Sir John
Rlfkind, Malcolm


Elliott, Sir William
Latham, Michael (Melton)
Roberts, Wyn (Conway)


Emery, Peter
Lawrence, Ivan
Rossi, Hugh (Hornsey)


Evans, Gwynfor (Carmarthen)
Lawson, Nigel
Rost, Peter (SE Derbyshire)


Ewing, Mrs Winifred (Moray)
Le Marchant, Spencer
Royle, Sir Anthony


Eyre, Reginald
Lester, Jim (Beeston)
Sainsbury, Tim


Fairbairn, Nicholas
Lewis, Kenneth (Rutland)
St. John-Stevas, Norman


Feirgrieve Russell
Lloyd, Ian
Scott, Nicholas


Farr, John
Loveridge, John
Scott-Hopkins, James


Fell, Anthony
Luce, Richard
Shaw, Giles (Pudsey)


Finsberg, Geoffrey
MacCormick, Iain
Shaw, Michael (Scarborough)


Fisher, Sir Nigel
McCrindle, Robert
Shelton, William (Streatham)


Fletcher, Alex (Edinburgh N)
MacGregor, John
Shepherd, Colin


Fietcher-Cooke, Charles
MacKay, Andrew (Stechford)
Shersby, Michael


Forman, Nigel
Macmillan, Rt Hon M. (Farnham)
Silvester, Fred


Fox, Marcus
McNair-Wilson, M. (Newbury)
Sims, Roger


Fraser, Rt Hon H. (Stafford &amp; St)
McNair-Wilson, P. (New Forest)
Sinclair, Sir George


Galbraith, Hon T. G. D.
Madel, David
Skeet, T. H. H.


Gardiner, George (Reigate)
Marshall, Michael (Arundel)
Smith, Dudley (Warwick)


Gardiner, Edward (S Fylde)
Marten, Neil
Smith, Timothy John (Ashfield)


Gilmour, Sir John (East Fife)
Mates, Michael
Speed, Keith


Glyn, Dr Alan
Mather, Carol
Spence, John


Godber, Rt Hon Joseph
Maude, Angus
Spicer, Jim (W Dorset)


Goodhart, Philip
Maxwell-Hyslop, Robin
Spicer, Michael (S Worcester)


Goodlad, Alastair
Meyer, Sir Anthony
Sproat, Iain


Gorst, John
Miller, Hal (Bromsgrove)
Stainton, Keith


Gow, Ian (Eastbourne)
Mills, Peter
Stanbrook, Ivor


Gower, Sir Raymond (Barry)
Miscampbell, Norman
Stanley, John


Grant, Anthony (Harrow C)
Mitchell, David (Basingstoke)
Steen, Anthony (Wavertree)


Gray, Hamish
Moate, Roger
Stewart, Ian (Hitchin)


Grieve, Percy
Monro, Hector
Stokes, John


Hamilton, Archibald (Epsom &amp; Ewell)
Montgomery, Fergus
Tapsell, Peter


Hamilton, Michael (Salisbury)
Moore, John (Croydon C)
Taylor, R. (Croydon NW)


Hampson, Dr Keith
Morgan, Geraint
Taylor, Teddy (Cathcart)


Hannam, John
Morgan-Giles, Rear Admiral
Tebbit, Norman


Harrison, Col Sir Harwood (Eye)
Morris, Michael (Northampton S)
Temple-Morris, Peter


Harvie Anderson, Rt Hon Miss
Morrison, Charles (Devizes)
Thatcher, Rt Hon Margaret


Haselhurst, Alan
Morrison, Hon Peter (Chester)
Thomas, Dafydd (Merioneth)


Hastings, Stephen
Neave, Airey
Thomas, Rt Hon P. (Hendon S)


Havers, Rt Hon Sir Michael
Nelson, Anthony
Thompson, George


Hawkins, Paul
Neubert, Michael
Townsend, Cyril D.


Hayhoe, Barney
Newton, Tony
Trotter, Neville


Hicks, Robert
Normanton, Tom
van Straubenzee, W. R.


Hodgson, Robin
Nott, John
Vaughan, Dr Gerard


Holland, Philip
Onslow, Cranley
Viggers, Peter


Hordern, Peter
Oppenheim, Mrs Sally
Wakeham, John


Howe, Rt Hon Sir Geoffrey
Osborn, John
Walder, David (Clitheroe)


Howell, David (Guildford)
Page, John (Harrow West)
Walker, Rt Hon P. (Worcester)


Howell, Ralph (North Norfolk)
Page, Rt Hon R. Graham (Crosby)
Walker-Smith, Rt Hon Sir Derek


Hunt, David (Wirral)
Page, Richard (Workington)
Walters, Dennis


Hunt, John (Ravensbourne)
Parkinson, Cecil
Warren, Kenneth


Hurd, Douglas
Pattie, Geoffrey
Watt, Hamish


Hutchison, Michael Clark
Percival, Ian
Weatherill, Bernard


Irving, Charles (Cheltenham)
Peyton, Rt Hon John
Wells, John


James, David
Pink, R. Bonner
Whitelaw, Rt Hon William


Jenkin, Rt Hon P. (Wanst'd&amp;W'df'd)
Prentice, Rt Hon Reg
Wiggin, Jerry


Jessel, Toby
Price, David (Eastleigh)
Wigley, Dafydd


Johnson Smith, G. (E Grinstead)
Prior, Rt Hon James
Wilson, Gordon (Dundee E)


Jopling, Michael
Pym, Rt Hon Francis
Winterton, Nicholas


Joseph, Rt Hon Sir Keith
Rathbone, Tim
Wood, Rt Hon Richard


Kaberry, Sir Donald
Rees, Peter (Dover &amp; Deal)
Young, Sir G. (Ealing, Acton)


Kellett-Bowman, Mrs Elaine
Rees-Davies, W. R.
Younger, Hon George


Kershaw, Anthony
Renton, Rt Hon Sir D. (Hunts)



Kimball, Marcus
Ronton, Tim (Mid-Sussex)
TELLERS FOR THE AYES:


King, Evelyn (South Dorset)
Rhodes James, R.
Mr. John Stradling Thomas and


Knight, Mrs Jill
Rhys Williams, Sir Brandon
Mr. Anthony Berry.


Knox, David
Ridley, Hon Nicholas



NOES


Abse, Leo
Benn, Rt Hon Anthony Wedgwood
Buchan, Norman


Allaun, Frank
Bennett, Andrew (Stockport N)
Buchanan, Richard


Anderson, Donald
Bidwell, Sydney
Callaghan, Jim (Middleton &amp; P)


Archer, Rt Hon Peter
Bishop, Rt Hon Edward
Campbell, Ian


Armstrong, Ernest
Blenkinsop, Arthur
Canavan, Dennis


Ashley, Jack
Booth, Rt Hon Albert
Carmichael, Nell


Ashton, Joe
Boothroyd, Miss Betty
Carter, Ray


Atkins, Ronald (Preston N)
Bottomley, Rt Hon Arthur
Carter-Jones, Lewis


Atkinson, Norman (H'gey Tott'ham)
Boyden, James (Bish Auck)
Cartwright, John


Bagier, Gordon A. T.
Bradley, Tom
Clemitson, Ivor


Barnett, Guy (Greenwich)
Bray, Dr Jeremy
Cocks, Rt Hon Michael (Bristol S)


Barnett, Rt lion Joel (Heywood)
Brown, Hugh D. (Provan)
Cohen, Stanley


Bates, Alf
Brown, Robert C. (Newcastle W)
Concannon, Rt Hon John


Bean, R. E.
Brown, Ronald (Hackney S)
Cook, Robin F. (Edin C)

Corbett, Robin
Jay, Rt Hon Douglas
Richardson, Miss Jo


Cowans, Harry
Jeger, Mrs Lena
Roberts, Albert (Normanton)


Cox, Thomas (Tooting)
Jenkins, Hugh (Putney)
Roberts, Gwilym (Cannock)


Craigen, Jim (Maryhill)
John, Brynmor
Robertson, George (Hamilton)


Crawshaw, Richard
Johnson, James (Hull West)
Robinson, Geoffrey


Cronin, John
Johnson, Walter (Derby S)
Roderick, Caerwyn


Crowther, Stan (Rotherham)
Johnston, Russell (Inverness)
Rodgers, George (Chorley)


Cunningham, G. (Islington S)
Jones, Alec (Rhondda)
Rodgers, Rt Hon William (Stockton)


Cunningham, Dr J. (Whiteh)
Jones, Dan (Burnley)
Rooker, J. W.


Dalyell, Tam
Judd, Frank
Roper, John


Davidson, Arthur
Kaufman, Rt Hon Gerald
Rose, Paul B.


Davies, Bryan (Enfield N)
Kerr, Russell
Ross, Stephen (Isle of Wight)


Davies, Rt Hon Denzil
Kilroy-Silk, Robert
Ross, Rt Hon W. (Kilmarnock)


Davies, Ifor (Gower)
Kinnock, Nell
Rowlands, Ted


Davis, Clinton (Hackney C)
Lamble, David
Ryman, John


Deakins, Eric
Lamond, James
Sandelson, Neville


Dean, Joseph (Leeds West)
Latham, Arthur (Paddington)
Sedgemore, Brian


de Freitas, Rt Hon Sir Geoffrey
Lestor, Miss Joan (Elton &amp; Slough)
Selby, Harry


Dell, Rt Hon Edmund
Lever, Rt Hon Harold
Sever, John


Dempsey, James
Lewis, Ron (Carlisle)
Shaw, Arnold (llford South)


Dewar, Donald
Litterick, Tom
Sheldon, Rt Hon Robert


Doig, Peter
Loyden, Eddie
Shore, Rt Hon Peter


Dormand, J. D.
Luard, Evan
Short, Mrs Renée (Wolv NE)


Douglas-Mann, Bruce
Lyon, Alexander (York)
Silkin, Rt Hon S. C. (Dulwich)


Dunnett, Jack
Lyons, Edward (Bradford W)
Silverman, Julius


Dunwoody, Mrs Gwyneth
Mabon, Rt Hon Dr J. Dickson
Skinner, Dennis


Eadle, Alex
McCartney, Hugh
Smith, Cyril (Rochdale)


Edge, Geoff
McDonald, Dr Oonagh
Smith, Rt. Hon. John (N Lanarkshire)


Edwards, Robert (Wolv SE)
McElhone, Frank
Snape, Peter


Ellis, John (Brigg &amp; Scun)
MacFarcuhar, Roderick
Spearing, Nigel


Ellis, Tom (Wrexham)
McGuire, Michael (Ince)
Spriggs, Leslie


English, Michael
MacKenzie, Rt Hon Gregor
Stallard, A. W.


Evans, Fred (Caerphilly)
McMillan, Tom (Glasgow C)
Steel, Rt Hon David


Evans, loan (Aberdare)
McNamara, Kevin
Stewart, Rt Hon M. (Fulham)


Evans, John (Newton)
Madden, Max
Stoddart, David


Ewing, Harry (Stirling)
Magee, Bryan
Stott, Roger


Faulds, Andrew
Mallalieu, J. P. W.
Strang, Gavin


Fernyhough, Rt Hon E.
Marks, Kenneth
Strauss, Rt Hon G. R.


Fitch, Alan (Wigan)
Marshall, Dr. Edmund (Goole)
Summerskill, Hon Dr Shirley


Flannery, Martin
Marshall, Jim (Leicester S)
Swain, Thomas


Foot, Rt Hon Michael




Ford, Ben
Mason, Rt Hon Roy
Taylor, Mrs Ann (Bolton W)


Fowler, Gerald (The Wrekin)
Maynard, Miss Joan
Thomas, Jeffrey (Abertillery)


Freeson, Rt Hon Reginald
Meacher, Michael
Thomas, Mike (Newcastle E)


Freud Clement
Mellish, Rt Hon Robert
Thomas, Ron (Bristol NW)


Garrett, John (Norwich S)
Mikardo, Ian
Thome, Stan (Preston South)


Garrett, W.E. (Wallsend)
Millan, Rt Hon Bruce
Thorpe, Rt Hon Jeremy (N Devon)


George, Bruce
Miller, Dr M. S. (E Kilbride)
Tierney, Sydney


Gilbert, Rt Hon Dr John
Mitchell, R. C. (Solon, ltchen)
Tiley, John


Ginsburg, David
Holloy, William
Tinn, James


Golding, John
Moonman, Eric
Tomlinson, John


Gould Bryan
Morris, Alfred (Wythenshawe)
Tomney, Frank


Gourlay, Harry
Morris, Rt Hon Charles R.
Torney, Tom


Grant, John (Islington C)
Morris, Rt Hon J. (Aberavon)
Tuck, Raphael


Grimond, Rt Hon J.
Moyle, Rt. Hon. Roland
Urwin, T. W.


Grocott, Bruce
Newens, Stanley
Walker, Harold (Doncaster)


Hamilton, James (Bothwell)
Noble, Mike
Walker, Terry (Kingswood)


Hamilton, W. W. (Central Fife)
Oakes, Gordon
Watkins, David


Hardy. Peter
Ogden, Eric
Watkinson, John


Harrison, Rt Hon Walter
O'Halloran, Michael
Weetch, Ken


Hart, Rt Hon Judith
Orbach, Maurice
Weitzman, David


Havers, Rt Hon Sir Michael
Orme, Rt Hon Stanley
Wellbeloved, James


Hayman, Mrs Helene
Ovenden, John
White, James (Pollok)


Healey, Rt Hon Denis
Owen, Rt Hon Dr David
Whitehead. Phillip


Heffer, Eric S.
Palmer, Arthur
Whitlock, William


Hooley, Frank
Pardoe, John
Willey, Rt Hon Frederick


Horam, John
Park, George
Williams, Rt Hon Shirley (Hertford)


Howell, Rt Hon Denis (B'ham, Sm H)
Parker, John
Williams, Sir Thomas (Warrington)


Hoyle, Doug (Nelson)
Parry, Robert
Wilson, Rt Hon Sir Harold (Huyton)


Huckfield, Les
Pavitt, Laurie
Wilson, William (Coventry SE)


Hughes, Mark (Durham)
Pendry, Tom
Wise, Mrs Audrey


Hughes, Robert (Aberdeen N)
Penhaligon, David
Woodall, Alec


Hughes, Roy (Newport)
Perry, Ernest
Woof, Robert


Hunter, Adam
Phipps, Dr Colin
Wrigglesworth, Ian


Irvine, Rt Hon Sir A. (Edge Hill)
Powell, Rt Hon J. Enoch
Young, David (Bolton E)


Irving, Rt Hon S. (Dartford)
Prescott, John



Jackson, Colin (Brighouse)
Price, C. (Lewisham W)
TELLERS FOR THE NOES:


Jackson, Miss Margaret (Lincoln)
Price, William (Rugby)
Mr, Donald Coleman and


Janner, Greville
Radice, Giles
Mr. Frank R. White.

Question accordingly negatived.

Clause added to the Bill.

New Clause No. 64

VEHICLES EXCISE DUTY: NORTHERN IRELAND

(1) For section 7(2) of the Vehicles (Excise) Act (Northern Ireland) 1972 there shall be substituted—

"(2) A mechancially propelled vehicle shall not be chargeable with any duty under this Act by reason of its use by or for the purposes of a person ('a disabled person') suffering from a physical defect or disability or by reason of its being kept for such use if—

(a) it is registered under this Act in the name of that person; and
(b) he has obtained, or is eligible for, a grant under Article 30(3) of the Health and Personal Social Services (Northern Ireland) Order 1972 in relation to that vehicle or is in receipt of a mobility allowance; and
(c) no other vehicle registered in his name under this Act is exempted from duty under this subsection or subsection (2A);
and for the purposes of this subsection a vehicle shall be deemed to be registered in the name of a disabled person in receipt of a mobility allowance if it is registered in the name of a person appointed pursuant to regulations under the Social Security (Northern Ireland) Act 1975 to exercise any of his rights or powers or in the name of a person nominated for the purposes of this subsection by the disabled person or by a person so appointed."

(2) So much of section 13 of the Finance Act 1976 as excludes a person entitled to mobility allowance from the exemption from duty confered by section 7(2A) of the said Act of 1972 shall cease to have effect.

(3) In the said section 7 (2A) after paragraph (b) there shall he inserted the words"and (c) no vehicle exempted from duty under subsection (2) is (or by virtue of that subsection is deemed to be) registered in his name under this Act."

(4) Section 26(c) of the said Act of 1972 (offences in respect of licence etc.) shall apply also to any document in the form of a licence which in pursuance of regulations made under that Act is issued in respect of a vehicle exempted from duty under section 7(2) or (2A) of that Act.

(5) This section shall come into force on 1st December 1978:.—[Mr. Bates]

Brought up, read the First and Second time, and added to the Bill.

New Clause No. 5

RELIEF FOR PREMIUMS SECURING PERMANENT HEALTH INSURANCE

'If the claimant has paid any premium in respect of a policy of insurance against loss of income caused by his being unable to work through illness or injury, he shall be entitled to a deduction from the income tax with

which he is chargeable equal to income tax at the basic rate on the amount of the premium.'. [Mr. Newton.]

Brought up, and read the First time.

6.30 p.m.

Mr. Newton: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this we may take new clause no. 6—Tax treatment of income from permanent health insurance—
'Where an individual's income for any year of assessment consists of or includes amounts paid as benefits arising from a policy of insurance against loss of income caused by his being unable to work through illness or injury, those amounts shall not be investment income for the purposes mentioned in section 32(3) of the Finance Act 1971.'.

Mr. Newton: The new clauses originate from a recommendation put to the Chancellor of the Exchequer by the Law Society in its pre-Budget recommendations. They relate to the tax treatment of premiums on, and the income secured from, policies for permanent health insurance.
Quite a number of people, particularly the self-employed, find it necessary and prudent to take out policies, apart from any benefits they may be entitled to under the national insurance system, to protect themselves against the loss of income which may occur if they are unable to work for a long time as a result of ill health or an accident. This seems to be a perfectly sensible, legitimate and prudent thing to do for many people, perhaps especially for those who are self-employed.
As the law stands, if a man takes out such an insurance there is no tax relief on the premiums and, if he loses income within the terms of the policy because of ill health or accident, the benefits will be taxable not as earned income, but as investment income. That seems to be wrong.
There appears to be one qualification which allows income to be taxed as investment income. I have a letter from the Company Pensions Information Centre which says:
the current situation is that for policies where the benefits are expressed as being payable to the employee (whether it is a private or a group policy) these benefits will be liable for tax as unearned income under Schedule D


of the Income and Corporation Taxes Act 1970.
If on the other hand the benefits under a group policy are expressed as being payable to the employer as reimbursement of wages he is paying, then tax liability does not exist as this is merely an indemnifying amount. The benefit that the employee would receive is technically wages (and not the proceeds of the policy) and would then be subject to P.A.Y.E. tax.
There is, therefore, an anomaly under which, if a policy is more or less by chance drawn up in one way, the benefit going to the individual will be treated as investment income and may be subject to the surcharge. However, if the policy is organised through the employer and is drawn up in another way, with the money being channelled through the employer in the form of something which legally counts as wages, only ordinary earned income tax will be payable. That is an anomaly within the overall anomaly which is difficult to defend.
Against a background in which the self-employed, who, I imagine, are likely to be among those particularly affected by the new clauses, already feel deeply aggrieved by the inadequacy of the provision for them under the national insurance system in relation to the contributions they pay, it seems to add insult to injury to deny them relief on premiums paid to secure proper protection and then to tax as investment income any benefits they may secure if they take out such protection.
This whole matter raises wider questions of the treatment of different sorts of income as investment income, but I wish to concentrate only on the relatively narrow point contained in the new clauses, which I commend to the House.

Mr. Percy Grieve: I support the new clause moved cogently and succinctly by my hon. Friend the Member for Braintree (Mr. Newton), who drew attention to yet one more anomaly in our overall tax system. It illustrates that the heavier and more complex taxes become, the more anomalies are created and the less just becomes the whole tax and fiscal system.
As my hon. Friend said, the distinctions drawn in our tax law between investment income and earned income bristle with anomalies. The most striking is the distinction drawn between what hap-

pens to the man who provides for his old age by saving or setting aside capital and the man who provides by contributing to a pension which may be treated, in whole or in part, as earned income even after he has retired.
It is clearly anomalous that someone who has provided against blindness, sickness accident or any of the adversities which may afflict a man should find that the income that he has provided for himself is treated as investment income and may be liable to the 15 per cent. surcharge. That is grossly unjust and that is why I support the new clauses.
On the fundamental point of whether premiums should attract tax relief, they are very much in the same class as the premiums paid for life insurance which get some relief. On that basis, I commend both new clauses to the House.

Mr. Joel Barnett: The hon. Member for Braintree (Mr. Newton) said that it was prudent for a man to take out health insurance, and I do not necessarily disagree with that. The question at issue is whether the premiums should be allowable for tax relief. New clause no. 6 seeks to make the income from such insurance ineligible for investment income surcharge.
The hon. Gentleman said that he had spoken briefly because it was a relatively simple matter. In fact, it is a fundamental matter for the income tax system because the hon. Gentleman is seeking to make a fundamental change. The personal tax system is related to the capacity to pay, whether through the personal allowances or through the level of income. That has been a general rule. It was endorsed by the Royal Commission and it has generally been found acceptable. Once we start on the path of allowing relief on the ground that the personal choice of an individual in one instance is good and in another is not and that we should make an allowance on that item of expenditure that is good, we are making a fundamental change.
No matter how much we may feel that we want to exempt a certain piece of expenditure, we should not pretend that we are dealing with a simple matter. It is a matter of great importance. Apart from that, it runs directly counter to what I thought was a general view of most hon. Members in the House, namely,


that we want a minimum number of reliefs so as to get the basic rates of tax as low as possible. The more we start extending reliefs on what we believe might be meritorious items of expenditure, the more we narrow the tax base and are required, in meeting the amount of revenue needed, to maintain tax rates at a higher level than all of us wish to see. That is not a simple matter but a fundamental change.
New clause no. 6 seeks to turn the income from sickness benefit into earned income. We appreciate that when people are sick or have had an accident we should have a great deal of sympathy for them. We would not want to harm them in any way. However, no one can dispute that the income paid under the policy is not earned income. It cannot be under any reasonable definition of the phrase.
In any event, I assure the House that the situation is nothing like as serious as the hon. Member for Braintree and the hon. and learned Member for Solihull (Mr. Grieve) implied because of the way in which the law now operates. The income from such a policy is now assessable under case 3 of schedule D as an annual payment. To ensure that it is an annual payment that is being taxed, the Inland Revenue issued an extra-statutory concession—28(A)—under which assessments are not made until payments have been continued for a full year. That means that in practice at least one year of such benefit under the policy would not be liable to the investment income surcharge and would not be liable to income tax at all. In practice, it will be for much longer than a year that the income will not be liable to any tax, let alone the surcharge.

Mr. Grieve: Does not what the right hon. Gentleman has said carry the implication that for a relatively short illness a man receives more favourable treatment than for a permanent disablement?

Mr. Barnett: The hon. and learned Gentleman is turning to an entirely different matter. He is now talking about tax benefits for someone who is permanently disabled. With respect, the clauses are not seeking to deal with permanent disablement.
I was saying that for the policies that we are talking about in new clause no. 5

the income arising from them for one year, and probably nearer two years, will escape tax altogether. If we legislated to remove the investment income surcharge, clearly there would need to be a review. We cannot remove the surcharge from income when we are not charging it to tax. We would have to review the whole procedure and the treatment generally. We would have to re-examine how the scheme worked.
I believe that the present system is welcomed by the vast majority of those receiving benefit from such policies. As I have said, they are not paying any tax. As for the investment income surcharge, which new clause no. 6 seeks to deal with, there is now an exemption from the surcharge for up to £1,700 a year. As the hon. and learned Gentleman implied in his intervention, a substantial premium would have to be paid for a very long time to produce investment income in excess of that figure so as to require the surcharge, to operate. In addition, it would be well over a year—probably nearer two years—before there was any tax liability.
6.45 p.m.
I am always willing to examine these matters to ascertain whether there is hardship, but as matters stand there does not seem to be a hardship that needs to be met by the acceptance of new clause no. 6. As I have said, new clause no. 5 proposes a fundamental change in our tax system. I cannot recommend it to the House.

Mr. Nigel Lawson: I must confess that when listening to the Chief Secretary I wondered who on earth had written his brief. The right lion. Gentleman's speech was not up to his usual standard.
My hon. Friend the Member for Braintree (Mr. Newton) deserves the congratulations of the House on having brought to our attention this small but important matter. It is especially important to those who are affected by it. As my hon. Friend said, the Law Society inspired him to draft the two clauses.
It may be helpful if I deal with the Chief Secretary's arguments in the order in which the clauses appear on the Notice Paper. I confess that I find new clause no. 5 to be not entirely as compelling as new clause no. 6. The right hon.


Gentleman was wholly wrong to say that it proposes a fundamental change. He knows as well as everyone else in the House that there is an allowance for life assurance premiums.

Mr. Joel Barnett: That is the only one.

Mr. Lawson: That has been allowed. It has been an important allowance for a long time. New clause no. 5 merely proposes an extension of that aspect of our fiscal system. It proposes a small and logical extension. To say that it would make a fundamental change in our tax system is nonsense.
The compelling argument was deployed by my hon. Friend the Member for Braintree, who extremely cogently moved the classes, and my hon. and learned Friend the Member for Solihull (Mr. Grieve) that the income arising from the policies covered by the clauses should not attract the investment income surcharge. That is right.
The right hon. Gentleman did not rest his case on the cost of the new clause. Obviously the cost would be negligible We do not need to worry about the cost He said that the income should be charged as investment income because it manifestly is not earned income. It seems that he has forgotten that in the past few years, as a result of pressure from the Opposition Benches, the Government have conceded that maintenance payments should no longer be subject to the investment income surcharge. Maintenance payments are in the hands of the wife who receives them. They are not earned income directly, but for tax purposes they are treated as earned income rather than investment income because they approach more closely earned income than investment income. That is the case that the Government have accepted. They should also accept that income in respect of earnings that have been forgone because of extended periods of illness approximate much more closely to earned income than investment income.
The right hon. Gentleman destroyed his case by saying. first, that my hon. Friend was making a bad point, only to say that it is such a good point that there is an extra-statutory concession that goes part of the way to meeting it. He destroyed his case by saying that if it were not that there would be considerable hardship as a

result of the operation of the investment income surcharge there would not have been the extra-statutory concession. He tried to say that the whole issue is covered by the threshold for the surcharge. He claimed—I did not take down his words verbatim—that a person would have to pay a very high premium to obtain an income of more than £1,700 a year if he became permanently ill. Perhaps the Chief Secretary will pay attention. I know that he finds great difficulty in listening to anybody except himself. I know that he loves the sound of his own voice, but perhaps he will pay attention to this point.
In fact, the Chief Secretary is wrong about this matter as about others. The premium payable for a permanent health insurance policy is very low. Fortunately, most people do not suffer illness or injury which requires them to be out of work for very long periods—possibly years. Therefore, the premium is relatively low. It is conceivable that, with a modest premium, people could obtain more than the £1,700 threshold.
The Chief Secretary totally failed to meet the indefensible anomaly brought to light by my hon. Friend the Member for Braintree (Mr. Newton) who compared the situation where a company insures an individual under one of these policies and the situation where the individual takes out a permanent life assurance policy. That is the nub of the point. If a company takes out insurance and collects money from the insurance company when a worker falls ill in order to make good his wages, that is held to be earned income and there is no investment income surcharge. Yet, if the individual on his own initiative, because the company is not prepared to do that, or for whatever reason—he may be self-employed and there may be no company to do it for him—takes out a permanent life assurance policy and the same sequence of events follows—the same illness and the same payment—because the money is paid direct to him, not via a company, that is regarded as unearned income and investment income surcharge is payable.
For that reason, if for no other. I advise my right hon. and hon. Friends to support new clause no. 6 in the Lobby. I hope that my hon. Friend the Member for Braintree will assist by seeking leave to withdraw new clause no. 5.

Mr. Newton: I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause No. 6

TAX TREATMENT OF INCOME FROM PERMANENT HEALTH INSURANCE

'Where an individual's income for any year of assessment consists of or includes amounts

Division No. 256]
AYES
[6.54 p.m.


Adley, Robert
Fisher, Sir Nigel
MacKay, Andrew (Stechford)


Aitken, Jonathan
Fletcher, Alex (Edinburgh N)
Macmillan, Rt Hon M. (Farnham)


Alison, Michael
Forman, Nigel
McNair-Wilson, M. (Newbury)


Arnold, Tom
Fox, Marcus
McNalr-Wilson, P. (New Forest)


Atkins, Rt Hon H. (Spelthorne)
Fraser, Rt Hon H. (Stafford &amp; St)
Madel, David


Atkinson, David (B'mouth, East)
Galbraith, Hon T. G. D.
Marshall, Michael (Arundel)


Bain, Mrs Margaret
Gardiner, George (Reigate)
Marten, Neil


Baker, Kenneth
Gardner, Edward (S Fylde)
Mather, Carol


Banks, Robert
Gilmour, Sir John (East Fife)
Maude, Angus


Bell, Ronald
Glyn, Dr Alan
Maxwell-Hyslop, Robin


Bendall, Vivian
Goodhart, Philip
Meyer, Sir Anthony


Bennett, Sir Frederic (Torbay)
Goodlad, Alastair
Miller, Hal (Bromsgrove)


Bennett, Dr Reginald (Fareham)
Gow, Ian (Eastbourne)
Mills, Peter


Benyon, W.
Gower, Sir Raymond (Barry)
Miscampbell, Norman


Berry, Hon Anthony
Grant, Anthony (Harrow C)
Mitchell, David (Basingstoke)


Bitten, John
Gray, Hamish
Moate, Roger


Biggs-Davison, John
Grieve, Percy
Monro, Hector


Blaker, Peter
Hall-Davis, A. G. F.
Montgomery, Fergus


Body, Richard
Hamilton, Archibald (Epsom &amp; Ewell)
Moore, John (Croydon C)


Boscawen, Hon Robert
Hamilton, Michael (Salisbury)
Morgan, Geralnt


Bowden, A. (Brighton, Kemptown)
Hampson, Dr Keith
Morgan-Giles, Rear Admiral


Bottomley, Peter
Hannam, John
Morrison, Charles (Devizes)


Boyson, Dr Rhodes (Brent)
Harrison, Col Sir Harwood (Eye)
Morrison, Hon Peter (Chester)


Braine, Sir Bernard
Harvie Anderson, Rt Hon Miss
Neave, Airey


Brittan, Leon
Haselhurst, Alan
Nelson, Anthony


Brocklebank-Fowler, C.
Hastings, Stephen
Neubert, Michael


Brooke, Hon Peter
Hawkins, Paul
Newton, Tony


Brotherton, Michael
Hayhoe, Barney
Normanton, Tom


Bryan, Sir Paul
Hicks, Robert
Nott, John


Buchanan-Smith, Alick
Hodgson, Robin
Onslow, Cranley


Buck, Antony
Holland, Philip
Oppenheim, Mrs Sally


Budgen, Nick
Hordern, Peter
Page, John (Harrow West)


Bulmer, Esmond
Howe, Rt Hon Sir Geoffrey
Page, Rt Hon R. Graham (Crosby)


Butler, Adam (Bosworth)
Howell, David (Guildford)
Page, Richard (Workington)


Chalker, Mrs Lynda
Howell, Ralph (North Norfolk)
Parkinson, Cecil


Channon, Paul
Hunt, David (Wirral)
Pattie, Geoffrey


Churchill, W. S.
Hunt, John (Ravensbourne)
Percival, Ian


Clark, Alan (Plymouth, Sutton)
Hurd, Douglas
Peyton, Rt Hon John


Clark, William (Croydon S)
Hutchison, Michael Clark
Pink, R. Bonner


Clarke, Kenneth (Rushcliffe)
Irving, Charles (Cheltenham)
Prentice, Rt Hon Reg


Cockcroft, John
James, David
Price, David (Eastleigh)


Cooke, Robert (Bristol W)
Jenkin, Rt Hon P. (Wanst'd&amp;W'df'd)
Pym, Rt Hon Francis


Cope, John
Jessei,Toby
Rathbone, Tim


Cormack, Patrick
Johnson Smith, G. (E Grinstead)
Rees, Peter (Dover &amp; Deal)


Corrie, John
Jopling, Michael
Rees-Davles, W. R.


Costain, A. P.
Joseph, Rt Hon Sir Keith
Renton, Rt Hon Sir D. (Hunts)


Crawford, Douglas
Kaberry, Sir Donald
Renton, Tim (Mid-Sussex)


Crowder, F. P.
Kellett-Bowman, Mrs Elaine
Rhodes James, R.


Davies, Rt Hon J. (Knutsford)
Kershaw, Anthony
Rhys Williams, Sir Brandon


Dean, Paul (N Somerset)
Kimball, Marcus
Ridley, Hon Nicholas


Dodsworth, Geoffrey
King, Evelyn (South Dorset)
Ridsdale, Julian


Douglas-Hamilton, Lord James
Knight, Mrs Jill
Rifkind, Malcolm


Drayson, Burnaby
Knox, David
Roberts, Wyn (Conway)


du Cann, Rt Hon Edward
Lamont, Norman
Rossi, Hugh (Hornsey)


Durant, Tony
Langford-Holt, Sir John
Rost, Peter (SE Derbyshire)


Dykes, Hugh
Latham, Michael (Melton)
Royle, Sir Anthony


Edwards, Nicholas (Pembroke)
Lawrence, Ivan
Sainsbury, Tim


Elliott, Sir William
Lawson, Nigel
St. John-Stevas, Norman


Evans, Gwynfor (Carmarthen)
Lester, Jim (Beeston)
Scott, Nicholas


Eyre, Reginald
Lewis, Kenneth (Rutland)
Scott-Hopkins, James


Fairbalrn, Nicholas
Lloyd, Ian
Shaw, Giles (Pudsey)


Falrgrieve, Russell
Loveridge, John
Shaw, Michael (Scarborough)


Farr, John
Luce, Richard
Shelton, William (Streatham)


Fell, Anthony
McCrindle, Robert
Shepherd, Colin


Finsberg, Geoffrey
VlacGregor, John
Shersby, Michael

paid as benefits arising from a policy of insurance against loss of income caused by his being unable to work through illness or injury, those amounts shall not be investment income for the purposes mentioned in section 32(3) of the Finance Act 1971.'.—[Mr. Newton.]

Brought up, and read the First time.

Motion made, and Question put, That the clause be read a Second time:—

The House divided: Ayes 239, Noes 264.

Silvester, Fred
Stradling Thomas, J.
Walker-Smith, Rt Hon Sir Derek


Sims, Roger
Tapsell, Peter
Walters, Dennis


Sinclair, Sir George
Taylor, R. (Croydon NW)
Warren, Kenneth


Skeet, T. H. H.
Tebbit, Norman
Watt, Hamish


Smith, Dudley (Warwick)
Temple-Morris, Peter
Weatherill, Bernard


Smith, Timothy John (Ashfield)
Thatcher, Rt Hon Margaret
Wells, John


Speed, Keith
Thomas, Dafydd (Merioneth)
Whitelaw, Rt Hon William


Spence, John
Thomas, Rt Hon P. (Hendon S)
Wiggin, Jerry


Spicer, Michael (S Worcester)
Thompson, George
Wigley, Dafydd


Sproat, Iain
Townsend, Cyril D.
Wilson, Gordon (Dundee E)


Stainton, Keith
Trotter, Neville
Wood, Rt Hon Richard


Stanbrook, Ivor
Vaughan, Dr Gerard
Younger, Hon George


Stanley, John
Viggers, Peter



Steen, Anthony (Wavertree)
Wakeham, John
TELLERS FOR THE AYES:


Stewart, Ian (Hitchin)
Walder, David (Clitheroe)
Mr. Spencer Le Marchant and


Stokes, John
Walker, Rt Hon P. (Worcester)
Sir George Young.


NOES


Abse, Leo
Douglas-Mann, Bruce
Kilroy-Silk, Robert


Allaun, Frank
Dunnett, Jack
Kinnock, Neil


Anderson, Donald
Dunwoody, Mrs Gwyneth
Lambie, David


Archer, Rt Hon Peter
Eadie, Alex
Lamond, James


Armstrong, Ernest
Edge, Geoff
Latham, Arthur (Paddington)


Ashley, Jack
Edwards, Robert (Wolv SE)
Lestor, Miss Joan (Elton &amp; Slough)


Ashton, Joe
Ellis, John (Brigg &amp; Scun)
Lever, Rt Hon Harold


Atkins, Ronald (Preston N)
English, Michael
Lewis, Ron (Carlisle)


Atkinson, Norman (H'gey Tott'ham)
Evans, Fred (Caerphilly)
Litterick, Tom


Bagler, Gordon A. T.
Evans, loan (Aberdare)
Loyden, Eddie


Barnett, Guy (Greenwich)
Evans, John (Newton)
Luard, Evan


Barnett, Rt Hon Joel (Heywood)
Ewing, Harry (Stirling)
Lyon, Alexander (York)


Bates, Alf
Faulds, Andrew
Mabon, Rt Hon Dr J. Dickson


Bean, R. E.
Fernyhough, Rt Hon E.
McCartney, Hugh


Benn, Rt Hon Anthony Wedgwood
Flannery, Martin
McDonald, Dr Oonagh


Bennett, Andrew (Stockport N)
Fletcher, Ted (Darlington)
McElhone, Frank


Bidwell, Sydney
Foot, Rt Hon Michael
MacFarouhar, Roderick


Bishop, Rt Hon Edward
Ford, Ben
McGuire, Michael (Ince)


Blenkinsop, Arthur
Fowler, Gerald (The Wrekin)
MacKenzie, Rt Hon Gregor


Booth, Rt Hon Albert
Fraser, John (Lambeth, N'w'd)
McMillan, Tom (Glasgow C)


Boothroyd, Miss Betty
Freeson, Rt Hon Reginald
McNamara, Kevin


Bottomley, Rt Hon Arthur
Freud, Clement
Madden, Max


Boyden, James (Bish Auck)
Garrett, John (Norwich S)
Magee, Bryan


Bradley, Tom
Garrett, W. E. (Wallsend)
Mallalieu, J. P. W.


Bray, Dr Jeremy
George, Bruce
Marks, Kenneth


Brown, Hugh D. (Provan)
Gilbert Rt Hon Dr John
Marshall, Dr. Edmund (Goole)


Brown, Robert C. (Newcastle W)
Ginsburg, David
Marshall, Jim (Leicester S)


Brown, Ronald (Hackney S)
Golding, John
Mason, Rt Hon Roy


Buchan, Norman
Gould, Bryan
Maynard, Miss Joan


Buchanan, Richard
Gourlay, Harry
Meacher, Michael


Callaghan, Jim (Middleton &amp; P)
Grant, John (Islington C)
Mellish, Rt Hon Robert


Campbell, Ian
Grimond, Rt Hon J.
Mikardo, Ian


Canavan, Dennis
Grocott, Bruce
Millan, Rt Hon Bruce


Carmichael, Neil
Hamilton, W. W. (Central Fife)
Miller, Dr M. S. (E Kilbride)


Carter, Ray
Hardy, Peter
Mitchell, Austin (Grimsby)


Carter-Jones, Lewis
Harrison, Rt Hon Walter
Mitchell, R. C. (Soton, ltichen)


Cartwright, John
Hart, Rt Hon Judith
Molloy, William


Clemitson, Ivor
Hattersley, Rt Hon Roy
Moonman, Eric


Cocks, Rt Hon Michael (Bristol S)
Hayman, Mrs Helene
Morris, Alfred (Wythenshawe)


Cohen, Stanley
Healey, Rt Hon Denis
Morris, Rt Hon Charles R.


Concannon, Rt Hon John
Heffer, Eric S.
Morris, Rt Hon J. (Aberavon)


Cook, Robin F. (Edin C)
Hooley, Frank
Moyle, Rt Hon Roland


Corbett, Robin
Horam, John
Newens, Stanley


Cowans, Harry
Howell, Rt Hon Denis (B'ham, Sm H)
Noble, Mike


Cox, Thomas (Tooting)
Hoyle, Doug (Nelson)
Oakes, Gordon


Craigen, Jim (Maryhill)
Huckfield, Les
Ogden, Eric


Crawshaw, Richard
Hughes, Robert (Aberdeen N)
O'Halloran, Michael


Cronin, John
Hughes, Roy (Newport)
Orbach, Maurice


Crowther, Stan (Rotherham)
Hunter, Adam
Orme, Rt Hon Stanley


Cunningham, G. (Islington S)
Irvine, Rt Hon Sir A. (Edge Hill)
Ovenden, John


Cunningham, Dr J. (Whiteh)
Irving, Rt Hon S. (Dartford)
Owen, Rt Hon Dr David


Dalyell, Tam
Jackson, Colin (Brighouse)
Palmer, Arthur


Davidson, Arthur
Jackson, Miss Margaret (Lincoln)
Pardoe, John


Davies, Bryan (Enfield N)
Janner, Greville
Park, George


Davies, Rt Hon Denzil
Jay, Rt Hon Douglas
Parker, John


Davies, Ifor (Gower)
Jeger, Mrs Lena
Parry, Robert


Davis, Clinton (Hackney C)
Jenkins, Hugh (Putney)
Pavitt, Laurie


Deakins, Eric
John, Brynmor
Pendry, Tom


Dean, Joseph (Leeds West)
Johnson, Walter (Derby S)
Penhaligon, David


de Freitas, Rt Hon Sir Geoffrey
Johnston, Russell (Inverness)
Phipps, Dr Colin


Dell, Rt Hon Edmund
Jones, Alec (Rhondda)
Powell, Rt Hon J. Enoch


Dempsey, James
Jones, Dan (Burnley)
Prescott, John


Dewar, Donald
Judd, Frank
Price, C. (Lewisham W)


Doig, Peter
Kaufman, Rt Hon Gerald
Price, William (Rugby)


Dormand, J. D.
Kerr, Russell
Radice, Giles

Richardson, Miss Jo
Smith, Cyril (Rochdale)
Walker, Harold (Doncaster)


Roberts, Albert (Normanton)
Smith, Rt, Hon. John (N Lanarkshire)
Watkins, David


Roberts, Gwilym (Cannock)
Snape, Peter
Watkinson, John


Robertson, George (Hamilton)
Spearing, Nigel
Weetch, Ken


Robinson, Geoffrey
Spriggs, Leslie
Weitzman, David


Roderick, Caerwyn
Stallard, A. W.
White, Frank R. (Bury)


Rodgers, George (Chorley)
Steel, Rt Hon David
White, James (Pollock)


Rodgers, Rt Hon William (Stockton)
Stewart, Rt Hon M. (Fulham)



Rooker, J. W.
Stott, Roger
Whitehead, Phillip


Roper, John
Strang, Gavin
Whitlock, William


Rose, Paul B.
Strauss, Rt Hon G. R.
Willey, Rt Hon Frederick


Ross, Stephen (Isle of Wight)
Swain, Thomas
Wiilliams, Rt Hon Shirley (Hertford)


Ross, Rt Hon W. (Kilmarnock)
Taylor, Mrs Ann (Bolton W)
Williams, Sir Thomas (Warrington)


Ryman, John
Thomas, Jeffrey (Abertillery)
Wilson, Rt Hon Sir Harold (Huyton)


Sandelson, Neville
Thomas, Mike (Newcastle E)
Wilson, William (Coventry SE)


Sedgemore, Brian
Thomas, Ron (Bristol NW)
Wise, Mrs Audrey


Selby, Harry
Thorne, Stan (Preston South)
Woodall, Alec


Sever, John
Thorpe, Rt Hon Jeremy (N Devon)
Woof, Robert


Shaw, Arnold (llford South)
Tierney, Sydney
Wrigglesworth, Ian


Sheldon, Rt Hon Robert
Tiley, John



Shore, Rt Hon Peter
Tinn, James
Young, David (Bolton E)


Short, Mrs Renée (Wolv NE)
Tomlinson, John



Silkin, Rt Hon S. C. (Dulwich)
Tomney, Frank
TELLERS FOR THE NOES:


Silverman, Julius
Torney, Tom
Mr. Ted Graham and


Skinner, Dennis
Urwin, T. W.
Mr. James Hamilton.

Question accordingly negatived.

New Clause No. 8

EXTENSION OF THE APPLICATION OF MAINTENANCE FUNDS FOR HISTORIC BUILDINGS

—(1) Section 84 of the Finance Act 1976 (Maintenance Funds for Historic Buildings) shall he amended as follows.

(2) For subsection (3)(a) substitute the following—

"(i) for the maintenance, repair or preservation of, or making provision for public access to, property which is for the time being qualifying property as defined in subsection (5) below; or".

(3) For subsection (5) substitute the following subsection—
(5) Property is qualifying property for the purposes of subsection (3)(a) above if it is

(a) land designated under—

(i) section 34(1)(a) of the Finance Act 1975; or
(ii) section 77(1)(b) above;
which comprises a garden or arboretum of historic, architectural or scientific interest with respect to which the requisite undertaking has been given under the said section 34 or section 76, 78(5) (b) or 82(3) above; or
(b) a building, land adjacent to it or an object historically associated with such a building designated under—

(i) the said section 34(1)(b), (c) or (d); or
(ii) section 77(1Xc), (d) or (e) above;
with respect to which the dequisite undertaking has been given under the said section 34 or section 76, 78(5)(b) or 82(3) above; and
(c) tax has not (since the last occasion on which such an undertaking

was given) become chargeable with respect to it under the said section 34 or under section 78 or 82(3) above".
(4) In subsection (6) after the words "mentioned in subsection" leave out"(1)(c) or (d) of section 77" and insert "(5)".
(5) This section shall have effect with respect to any settlement to which the Treasury give a direction under subsection (1) of the said section 84 after the passing of his Act.'.—[Mr. Robert Cooke.]

Brought up, and read the First time.

7.0 p.m.

Mr. Robert Cooke: I beg to move, That the clause be read a Second time.
This new clause has the support of hon. Members on both sides of the House. It provides for the income from a maintenance fund to be applied to the upkeep of gardens, arboreta and chattels associated with historic buildings. It will not of itself achieve anything at all, because it pre-supposes that an owner of a heritage property has set up a so-called maintenance fund with his own money. Only recently, in reply from the Treasury, we were told that nobody had so far done so. I suspect that this is because the provisions for so doing are so unattractive since they involve saying goodbye irrevocably to what could well be the owner's last remaining capital asset.
However, if the Government, in their wisdom, are to make the so-called maintenance funds workable the new clause is an essential extension of the application of private resources to the public purpose of preserving an ever more accessible heritage. That is a philosophy that we on this side have for long embraced. Indeed,


it is embraced in many other parts of the House.
I hope that the Government will accept the new clause. I hope that they will also bear in mind that more needs to be done to extricate the heritage from the strangling coils of capital transfer tax. The Government might reflect that there are 16 other new clauses on the Notice Paper which are deliberately starred so that they do not obscure this limited debate: they prove what a mess we are in.
The heritage, provided that it is accessible—and that is an absolute requirement for my proposition—should not be crippled by taxes. It is a solemn thought that the flood of sales of works of art and of buildings, the fates of which hang in the balance, will grow month by month unless effective action is taken soon.

Mr. Patrick Cormack: I associate myself with the remarks of my hon. Friend the Member for Bristol, West (Mr. Cooke). The case is unanswerable. I hope that the Government will accept this all-party clause. We are not asking the Government to reverse or change their policies. We ask them to accept their own precedent and to proceed in a way which could help to save many important parts of our national heritage.
Two matters particularly are at issue. First, we seek to safeguard the treasures within historic houses and heritage properties. Secondly, we seek to safeguard the beautiful gardens and grounds that often surround them. The Government have always accepted that these are worth fighting for and saving. They have conceded that in previous Finance Acts. We do not believe that the maintenance funds, as they are established, are sufficiently attractive. But we welcome the precedent that has been set. We hope that the Government will do something to make maintenance funds workable.
I should like to underline what has been said repeatedly by Ministers in the last couple of years both here and in the other place. They said it at the time of the Mentmore debate, during the recent battle over the Canalettos, which we are so delighted have been saved, and during the great debates over the Stubbs pictures

last year. They have said that the cheapest and most economic and attractive way of preserving our historic houses is to encourage the owners to remain within them. Baroness Birk has expressed that view more than once in the other place and her comments have been echoed by Lord Donaldson. The Chancellor of the Exchequer has said the same.
In our modest proposal we are saying simply that we applaud the Government's acceptance of this self-evident truth, and we ask them to do something to make maintenance funds more workable. We ask the Government to enable these funds to embrace those particular matters about which Governmental concern has been repeatedly expressed in recent years.

Mr. Dudley Smith: I should like to endorse what has been said. I represent a part of the country in the heart of England which contains a large number of historic buildings, ranging from one that has acquired a certain notoriety recently—Warwick Castle—down to the small and worthwhile stately home called Baddesley Clinton, which lies north of Warwick, off the 13irmingham road. The owner has experienced considerable difficulties and the future of this beautiful property is now in doubt.
Although quite a lot has been done to assist those who try to maintain these stately homes and other historic buildings. I am sure that much more needs to be done. As my hon. Friend the Member for Cannock (Mr. Cormack) said, we need to be able to encourage more and more people to remain in these buildings where possible and to make the buildings accessible to the public. There is a great fund of good will among the general public. Regardless of political beliefs, the vast majority of people support the preservation of historic homes as part of our heritage and believe that there should be ample opportunities for the public to visit them. They regard them as an integral part of the country.
As my hon. Friend the Member for Bristol, West (Mr. Cooke) said, this is a modest gesture which deserves support. I hope that the Government will find a IA ay of accepting it.

Mr. Giles Radice: I have some sympathy with the clause. Clearly the contents of a great historic


home can be a major part of the heritage. Probably, however, before we move forward on that front, we need to look rather more carefully at how we define "contents".
The part of the clause with which I am most sympathetic concerns gardens and arboreta because clearly gardens are a major part of our national heritage. There are many beautiful gardens in this country and they are a major tourist attraction. In many case, the money paid by the visiting public does not cover costs.

Mr. Cormack: Does the hon. Member agree that the member of the public who flock to these places—there were 15 million separate visits last year—are attracted as much by the contents of the houses as by the grounds? Is it not, therefore, important to try to preserve what we have rather than follow the example of those French chateaux which are empty shells?

Mr. Radice: I said that I had some sympathy with the clause, but that before we supported it we should be clearer as to what we meant by "contents". The case for gardens and arboreta is much stronger in the sense that some gardens already qualify if they are attached to an historic building, whereas I understand that there are 60 outstanding gardens and arboreta which do not qualify because they are not associated with an historic building. In a sense, therefore, we are seeking to correct an anomaly by extending maintenance funds to these gardens.
I hope that the Government can accept, if not the clause at it stands, the spirit behind it.

7.15 p.m.

Mr. Nicholas Ridley: I, too, support the clause. I remember the night of the Committee stage of the 1975 Act when the Government first put down the principle that certain parts of the heritage could be reserved and preserved provided they were not sold and were in trust on behalf of the owner. I remember the hon. Member for Edmonton (Mr. Graham), who is not here at the moment, who played an important part in those debates, saying that he hoped that the inmates of the historic house would be able to continue to live in modesty and comfort. As was pointed

out by my hon. Friend the Member for Blaby (Mr. Lawson), the experience of most of these people is of immodesty and discomfort.
I welcome this step, small though it is, and I hope that we may take it for this reason. I commend to the Labour Party that if a man inherits a Rembrandt worth £1 million, or Mentmore, worth more than £1 million, it is possible to say that he is a very rich man with possessions in excess of £1 million. He would appear under Lord Diamond's classification and the statistics that he trots out as owning a certain percentage of the wealth. If a man inherited a Rembrandt and passed it on when he died he would not enjoy or spend one penny of the money. That is the correct principle for us to follow in order to achieve some sort of common ground in the matter of capital taxation.
The same is true of a man who inherits shares in a family business, or who inherits agricultural land or forestry. We have made concessions for these three categories in respect of capital transfer tax by way of easements for those who take up these estates and pass them on unimpaired or even improved. Surely the principle this House should seek to achieve is to move towards a disinvestment tax. Those who sell their patrimony, be it heritage, artistic, industrial, financial or whatever, should be taxed heavily upon cashing in. Those who improve and pass on these assets to future generations should be exempt from this sort of taxation.
I believe that is common ground between the two sides of the House, which is why the hon. Member for Chester-le-street (Mr. Radice) expressed some sympathy with the small step that is now proposed. The maintenance fund which is used to keep up a good garden or to keep good chattels, pictures or possessions inside a house is of no benefit to any individual who might have owned the chattels. It is of benefit only to the millions who will see and enjoy them, and that is a better way of preserving them even if it means turning the erstwhile owner into a sort of museum keeper, whether modest or immodest, in comfort or discomfort.
That is the best way forward and therefore I hope that the House will accept this modest clause.

The Minister of State, Treasury (Mr. Denzil Davies): This new clause seeks to extend the benefits which apply at the moment under the maintenance fund provisions. Perhaps I can remind the House. The hon. Member for Bristol, West (Mr. Cooke), who moved the clause did not go into detail and he seemed to think that maintenance funds were not very beneficial, so perhaps I should remind the House of the considerable benefits that accrue as a result of setting up a maintenance fund. There are benefits from capital transfer tax and capital gains tax, and there are income tax benefits once a maintenance fund is set up.
The maintenance fund provision was introduced only in the Finance Act 1976, and last year the income tax reliefs were extended. It is true to say that it has taken a bit of time, but not a very long time, for advantage to be taken of it. We know now that at least two cases are coming to fruition. The hon. Member for Blaby (Mr. Lawson) may laugh, but it takes a long time to set up a maintenance fund and do the documentation. There are two cases at the moment about to be completed and only waiting for legal formalities. There are many other cases in the pipeline of people wanting to take advantage of these maintenance fund provisions, and I think that we shall see more over the next few years.
It is no good hon. Members opposite belittling the maintenance fund. It is an important provision of great benefit to the owners of historic houses. They are coming to recognise that benefit, which is, as I have said, the capital transfer tax benefit, the capital tax gains benefit, and the income tax benefit.
The income tax benefit is particularly apposite to the new clause. The income tax benefit at the moment covers repairs and maintenance of historic buildings. Any repairs or maintenance get the benefit of the income tax reliefs under the maintenance fund provisions.
The new clause has two purposes: first to extend the benefits to the contents of the house and, second, to extend the benefits to gardens and arboreta. I have great reservations about the proposed extension to contents. As my hon. Friend the Member for Chester-le-Street (Mr. Radice) pointed out, there is no tight definition

here of contents. Presumably, any provision on the part of the owner to maintain the contents, such as turning up the central heating to keep the Chippendale at the right temperature, would come within the category of expenses which would be allowable for the income tax reliefs in the maintenance fund provision. That may or may not be desirable, but that is a benefit which, I think, would accrue. There are other cases as well which one could mention.
Since it is very difficult to restrict of limit the benefit in relation to contents, I should be very reluctant to go along with that part of the new clause.
As regards gardens and arboreta, again as my hon. Friend the Member for Chester-le-Street pointed out, the case is stronger. If they are adjacent, as I understand it, gardens are exempt under the existing provisions anyway. We are talking here about gardens and arboreta which perhaps are not adjacent but are some way distant or standing on their own not in relation directly to the historic house. That is the area of exemption which the new clause seeks to incorporate in the legislation.
I am prepared to look sympathetically at the question of gardens and arboreta with a view to bringing forward legislation in next year's Finance Bill to meet the spirit of the point made, but I must make quite clear as regards contents that I do not think that the case has been made out.
I should add, although there is considerable scepticism on the Opposition Front Bench when Treasury Ministers say that drafting is defective, that the advice I have from the Inland Revenue is that there is a technical defect in the clause. The existing provision in section 84 which gives the exemption allows people to get property designated as being of heritage quality—which is the basic requirement—even if it has not been the subject of a claim for additional exemption from capital transfer tax. There is an attempt in the new clause to keep that concession. In fact, the wording of the clause in relation to subsection (6) of section 84 would mean that that facility would not be available in future, although it is available at the moment, for buildings, land, contents and, indeed, arboreta. So through an error of drafting—I am not making


a point about it but I must tell the House —the clause restricts the present benefit in relation to buildings and lands as regards conditional exemption. If the House were to accept the clause as it stands, there would in that respect be a restriction on the present law.

Mr. Tam Dalyell: I agree strongly with what my right hon. Friend said, but if there is a certain sympathy as regards gardens and arboreta, is it not better to proceed through the mechanism of the Historic Buildings Council and direct grant instead of trying to do it somewhat imprecisely and with great difficulty through the tax system?

Mr. Davies: My hon. Friend has raised an important point. There are arguments on both sides. It could be argued that one should not go along the road of tax concession, as he has suggested. However, it would be inconsistent of the Government now, having accepted that we should give some tax relief and having agreed on the question of a maintenance fund, to say that they cannot include gardens in the exemption. As I have said, gardens which are adjacent are already included.

Mr. Ridley: As the Minister has virtually accepted the point in relation to gardens and arboreta, will the clause that he will prepare for next year's Finance Bill to cover the point be retrospective to the present date, since he has accepted the principle today? Obviously, that will make a great deal of difference to those who are affected in the ensuing financial year.

Mr. Davies: That point will be taken into account, but I cannot say anything about it now. As I have said, we are prepared to look at the provisions for gardens are arboreta sympathetically, with a view to legislation next year, but not in respect to contents. I reiterate also that the clause is defective in that it would tighten the restrictions.

Mr. Cormack: If the Minister is sympathetic at least to part of the case —and we welcome that—why did the Government not produce their own variation of the clause in time for today's debate? Surely, the advice which the

right hon. Gentleman has received must have been received some little time ago.

Mr. Davies: The Government have to consider many pressures and suggestions for changing the tax system. A vast number of new clauses are put down. I suggest to the hon. Gentlemen, especially with the powerful lobby behind them and the expert advice available to them, that they could have made sure they got their new clause right. It is no good complaining now and saying that the Government should have done the drafting for them.

Mr. Peter Rees: We have had an extremely useful debate on an important subject, and we should congratulate, in particular, my hon. Friends the Members for Bristol, West (Mr. Cooke) and for Staffordshire, South-West (Mr. Cormack), who have laboured so assiduously in this matter.
This is not the moment to debate the merits of capital transfer tax. That would be going too wide. We may take it as a sign of grace that in 1976 the Government for the first time recognised what we had long warned them to be the risks which they were generating for the national heritage. As a result, we coaxed out of the Government a very modest relief in the form of maintenance fund provision. Again, this is perhaps not the time to debate the limitations and difficulties inseparable from the relief as it has been introduced. I hope there will he other occasions to do so.
I detected some diffidence in the Minister of State, who, we know, approaches these problems, when he can, with an open mind. He recognises that not very many people have so far sought to take advantage of these provisions. I must tell him candidly that the reason is that the relief is too tightly drawn. I hope there will be other occasions when we can return to that.
Today, we are concerned merely with the scope of national heritage assets to which the maintenance fund relief, such as it is, should be extended. There seems to be a delightful degree of unanimity in the House this evening that gardens and arboreta deserve some kind of relief. I am glad that the hon. Member for Chester-le-Street (Mr. Radice) has shown that same interest, and I believe that he indicated it in Committee, too.
7.30 p.m.
It is not necessary to instance the kind of case that we have in mind, but I would cite only the garden at Westbury which the National Trust has recognised, or that at Sissinghurst or the arboretum at Bedgebury or that at Westonbirk. I take at random some in the ownership of the National Trust, some of the Forestry Commission and some in private hands. The Minister has recognised the difficulties of those who are still concerned in the private sector with the management and care of gardens and arboreta. They demand considerable attention and money. To use a horrible phrase, they are labour intensive.
Therefore, it is important that they should be preserved. I like to think that the Government have recognised what an appalling burden they would have to take on if all these gardens and arboreta—there must be at least 25 or 35 of a transcendent quality—

Mr. Radice: Sixty.

Mr. Rees: I am happy to take that figure, but there is some imprecision here. I doubt whether any Government would want to take on the responsibility of running and caring for these properties. Some will always fall into public hands because there will not be families with the resources, the application or the interest to preserve what they have inherited. Therefore, as a last resort, the Government may have to take control, passing them on in certain cases to the National Trust or the Forestry Commission.
We are happy that the Minister has recognised this strong case. We need not trouble ourselves with his criticisms of any technical defects. It seems that he will not willingly accept the clause. The technical defects cannot be overwhelming because they can relate only to gardens and arboreta which cannot at the moment take advantage of the maintenance fund relief.

Mr. Denzil Davies: Perhaps I did not make myself clear. The defects would in fact then relate to the items—the house itself—which at the moment get this exemption. It would make the position worse for those objects which at present get benefit.

Mr. Rees: I should hate to bandy words with the right hon. Gentleman on the technicalities of this provision, but he suggests that such defects as there may be would extend to cases in which gardens or arboreta are attached to a house. But the new clause is designed to relate to gardens and arboreta on their own.

Mr. Denzil Davies: But the way in which it is drafted and the way in which it seeks to amend the original section 84 would restrict relief to what gets relict at the moment—the repairs and maintenance of the house. That is unintentional, but that is what it does.

Mr. Rees: As I said I will not take up time on that, but I am not certain whether the right hon. Gentleman has entirely focused on the point, that the new clause as drafted is aimed at gardens and arboreta which stand on their own. There is obviously a technical point here which perhaps we should thrash out. No doubt my hon. Friend has taken the best possible advice—

Mr. Denzil Davies: It was not good enough.

Mr. Rees: So the Minister says, but the charge was thrown across the Committee floor so often that amendments were technically defective that I am bound to say that we look warily at those objections. But let me leave the question of gardens and arboreta with the technical defects that the Minister affects to detect.
Let me come to the question of objects which are historically associated with buildings. Here the argument was not one of technical detail but one of principle. The hon. Member for Chester-le-Street was a little concerned that the clause was not sufficiently tightly drawn there and the Minister was disposed to say that there was some imprecision.
I think that the clause is quite precise. It is aimed at giving relief to objects which are historically associated with buildings which would qualify for relief under maintenance funds. Of course, it must be a question of fact in any given case whether an object is historically associated, but there must be some clear examples—for instance, the relics of the Duke of Wellington at Stratfield Saye, the tapestries at Blenheim designed to commemorate the victories of the first Duke of Marlborough, perhaps the manuscripts


of the first Lord Burghley at Hatfield. There must be many examples about which there could be no serious dispute. I wonder whether the Minister has addressed his mind to that problem.
The Minister said that all this could have been ventilated earlier and that it is now too late for the Government to accept the new clause, but that something will be done in the next Finance Bill. I do not want to introduce a partisan note into a debate which has been notable for its bipartisan nature, but the Minister cannot assure us that he will be able to put down a new clause of any kind in the next Finance Bill. However, I do not want to open the debate.
A new clause in precisely these terms, and several others, were on the Amendment Paper in Committee. It was the bounden duty of the Minister, if he felt that there was any merit in that new clause, to have directed his mind to it at that stage. I have no doubt, such are the friendly relations which obtain between my hon. Friend the Member for Bristol, West and the Minister, that he could have privately pointed out the defects to my hon. Friend.
Therefore, I am not particularly impressed by those arguments. I recognise that the Minister has moved a little way down the path that we have been coaxing him down since 1976, but he will have to go a little further. I am sorry that he cannot meet us at this stage. I do not think that we are ever deterred by the technical defects that he affects to see, and I hope that my hon. Friend, to demonstrate the importance of the principle, will press the new clause to a Division.

Mr. Dalyell: I am a member of the Council of the National Trust for Scotland, but I speak in a personal capacity and very much on the Government side of the argument. The hon. Member for Bristol, West (Mr. Cooke) spoke for example of Sissinghurst. He must know as well as the rest of us that it is expensive to keep such a garden. The impression that I got from Nigel Nicolson is that it is extremely expensive. There is a limited amount in this kitty.
Are we to have some kind of "watering can" effect through the tax system,

or is it better, through the mechanism of the Historic Buildings Council, to choose certain gardens which in the public interest should be maintained at a high standard? From Scottish experience, I know that it is certainly within recent recollection that when it was wished to preserve the gardens at Crathes that was perfectly well done through the HBC. The Minister of State's attitude is surely right and he is right also about the mechanism. I shall be the first into the Government Lobby to support him.

Mr. Pardoe: Having last year moved a clause which extended the maintenance funds to take account of income tax, having had some part in wringing that concession out of the Government, I agreed with everything said by the hon. and learned Member for Dover and Deal (Mr. Rees) until his last sentence. He seemed to go completely berserk at the last minute.
The Minister has advised us that it is the Inland Revenue's view that the clause as drafted, for a technical reason, will undo some of the good that the hon. and learned Gentleman and I did in 1976 and 1977 for maintenance funds. Does he really want to do that? The very idea of voting for a clause which sabotages what we did in the last two Finance Bills is utterly crazy. I hope that the hon. Member for Bristol, West (Mr. Cooke) will not take the advice which his hon. and learned Friend has given him.

Mr. Robert Cooke: I am afraid that I must disappoint the hon. Member for Cornwall, North (Mr. Pardoe). I will indeed take the advice given by my Front Bench on the matter of principle. It is a matter of principle that what we intend to do in our new clause should be done. The Government have introduced a capital transfer tax in such a manner that it has attacked the heritage in every possible aspect. We now seek to unravel the knot.
For that reason, I ask my right hon. and hon. Friends, on this matter of principle—even if on Report the detail is wrong—and whoever got a new clause right on Report except the Government—to support me in the Lobby.

Question put, That the clause be read a Second time:—

Division No. 257]
AYES
[7.47 p.m.


Adley, Robert
Grieve, Percy
Nott, John


Aitken, Jonathan
Grylls, Michael
Onslow, Cranley


Alison, Michael
Hall-Davis, A. G. F
Oppenhelm, Mrs Sally


Arnold, Tom
Hamilton, Archibald (Epsom &amp; Ewell)
Page, John (Harrow West)


Atkins, Rt Hon H. (Spelthorne)
Hamilton, Michael (Salisbury)
Page, Rt Hon R. Graham (Crosby)


Atkinson, David (B' mouth, East)
Hampson, Dr Keith
Page, Richard (Workington)


Banks, Robert
Hannam, John
Parkinson, Cecil


Bell, Ronald
Harrison, Col Sir Harwood (Eye)
Pattie, Geoffrey


Bendall, Vivian
Harvie Anderson, Rt Hon Miss
Percival, Ian


Bennett, Sir Frederic (Torbay)
Haselhurst, Alan
Pink, R. Bonner


Bennett, Dr Reginald (Fareham)
Hawkins, Paul
Prentice, Rt Hon Reg


Benyon, W.
Hayhoe, Barney
Price, David (Eastleigh)


Biffen, John
Hicks, Robert
Prior, Rt Hon James


Biggs-Davison, John
Hodgson, Robin
Pym, Rt Hon Francis


Blaker, Peter
Holland, Philip
Raison, Timothy


Body, Richard
Hordern, Peter
Rathbone, Tim


Boscawen, Hon Robert
Howe, Rt Hon Sir Geoffrey
Rees, Peter (Dover &amp; Deal)


Bottomley, Peter
Howell, David (Guildford)
Rees-Davies, W. R.


Bowden, A. (Brighton, Kemptown)
Howell, Ralph (North Norfolk)
Rhodes James, R.


Boyson, Dr Rhodes (Brent)
Hunt, David (Wirral)
Ridley, Hon Nicholas


Braine, Sir Bernard
Hunt, John (Ravensbourne)
Ridsdale, Julian


Brittan, Leon
Hurd, Douglas
Rifkind, Malcolm


Brocklebank-Fowler, C.
Hutchison, Michael Clark
Roberts, Wyn (Conway)


Brooke, Hon Peter
Irving, Charles (Cheltenham)
Rost, Peter (SE Derbyshire)


Brotherton, Michael
James, David
Royle, Sir Anthony


Buchanan-Smith, Alick
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Sainsbury, Tim


Buck, Antony
Jessel, Toby
St. John-Stevas, Norman


Budgen, Nick
Johnson Smith, G. (E. Grinstead)
Scott, Nicholas


Butler, Adam (Bosworth)
Jopling, Michael
Scott-Hopkins, James


Chalker, Mrs Lynda
Joseph, Rt Hon Sir Keith
Shaw, Giles (Pudsey)


Channon, Paul
Kaberry, Sir Donald
Shaw, Michael (Scarborough)


Churchill, W. S.
Kellett-Bowman, Mrs Elaine
Shelton, William (Streatham)


Clark, Alan (Plymouth, Sutton)
Kershaw, Anthony
Shepherd, Colin


Clarke, Kenneth (Rushcliffe)
Kimball, Marcus
Shersby, Michael


Cockcroft, John
King, Evelyn (South Dorset)
Silvester, Fred


Cooke, Robert (Bristol W)
Knox, David
Sims, Roger


Cope, John
Lamont, Norman
Sinclair, Sir George


Cormack, Patrick
Langford-Holt, Sir John
Skeet, T. H. H.


Corrie, John
Latham, Michael (Melton)
Smith, Dudley (Warwick)


costain, A. P.
Lawson, Nigel
Smith, Timothy John (Ashfield)


Crowther, Stan (Rotherham)
Le Marchant, Spencer
Speed, Keith


Davies, Rt Hon J. (Knutsford)
Lester, Jim (Beeston)
Spence, John


Dean, Paul (N Somerset)
Lewis, Kenneth (Rutland)
Spicer, Michael (S Worcester)


Dodsworth, Geoffrey
Lloyd, Ian
Sproat, Iain


Douglas-Hamilton, Lord James
Loveridoe John
Stainton, Keith


Drayson, Burnaby
Luce, Richard
Stanbrook, Ivor


du Cann, Rt Hon Edward
McCrindle, Robert
Stanley, John


Durant, Tony
MacGregor, John
Steen, Anthony(Wavertree)


Dykes, Hugh
MacKay, Andrew (Stechford)
Stewart, Ian (Hitchin)


Eden, Rt Hon Sir John
Macmillan, Rt Hon M. (Farnham)
Stokes, John


Edwards, Nicholas (Pembroke)
McNair-Wilson, M. (Newbury)
Stradling Thomas, J.


Elliott, Sir William
McNair-Wilson, P. {New Forest)
Tapsell, Peter


Emery, Peter
Madel, David
Taylor, R. (croydon NW)


Eyre, Reginald
Marshall, Michael (Arundel)
Tebbit, Norman


Fairbairn, Nicholas
Marten, Neil
Temple-Morris, Peter


Fairgrieve, Russell
Mather, Carol
Thatcher, Rt Hon Margaret


Farr, John
Maude, Angus
Thomas, Rt Hon P. (Hendon S)


Fell, Anthony
Maxwell-Hyslop, Robin
Townsend, Cyril D.


Finsberg, Geoffrey
Mayhew, Patrick
Trotter, Neville


Fisher, Sir Nigel
Meyer, Sir Anthony
Vaughan, Dr Gerard


Fletcher, Alex (Edinburgh N)
Mills, Peter
Viggers, Peter


Forman, Nigel
Miscampbell, Norman
Wakeham, John


Fox, Marcus
Mitchell, David (Basingstoke)
Walder, David (Clitheroe)


Fraser, Rt Hon H. (Stafford &amp; St)
Moate, Roger
walker, Rt Hon P. (Worcester)


Galbraith Hon T. G. D.
Monro, Hector
Walker-Smith, Rt Hon Sir Derek


Gardiner, George (Reigate)
Montgomery, Fergus
Warren, Kenneth


Gardner, Edward (S Fylde)
Moore, John (Croydon C)
Weatherill, Bernard


Gilmour, Sir John (East Fife)
Morgan, Geraint
Wells, John


Glyn, Dr Alan
Morrison, Charles (Devizes)
Wiggln, Jerry


Godber, Rt Hon Joseph
Morrison, Hon Peter (Chester)
Wood, Rt Hon Richard


Goodiad, Alastair
Neave, Airey
Younger, Hon George


Gorst, John
Nelson, Anthony



Gow, Ian (Eastbourne)
Neubert, Michael



Gower, Sir Raymond (Barry)
Newton, Tony
TELLERS FOR THE AYES:


Grant, Anthony (Harrow C)
Normanton, Tom
Sir George Young and


Gray, Hamish

Mr. Anthony Berry.

The House divided: Ayes 222, Noes 256.

NOES


Abse, Leo
Garrett, W. E. (Wallsend)
Morris, Rt Hon J. (Aberavon)


Abse, Leo Allaun, Frank
George, Bruce
Moyle, Rt. Hon. Roland


Anderson, Donald
Gilbert, Rt Hon Dr John
Murray, Rt Hon Ronald King


Armstrong, Ernest
Ginsburg, David
Newens, Stanley


Achley, Jack
Golding, John
Noble, Mike


Ashton, Joe
Gould, Bryan
Oakes, Gordon


Atkins, Ronald (Preston N)
Gourlay, Harry
Ogden, Eric


Atkinson Norman (H'gey, Tott'ham)
Graham, Ted
O'Halloran, Michael


Bagier, Gordon A. T.
Grant, John (Islington C)
Orbach, Maurice


Barnett Guy (Greenwich)
Hamilton, James (Bothwell)
Orme, Rt Hon Stanley


Barnett, Rt Hon Joel (Heywood)
Hamilton, W. W. (Central Fife)
Ovenden, John


Bates, Alf
Hardy, Peter
Owen, Rt Hon Dr David


Bean, R. E.
Harrison, Rt Hon Walter
Palmer, Arthur


Beith, A. J.
Hart, Rt Hon Judith
Pardoe, John


Bennett, Andrew (Stockport N)
Hattersley, Rt Hon Roy
Park, George


Bidwell, Sydney
Hayman, Mrs Helene
Parker, John


Bishop, Rt Hon Edward
Healey, Rt Hon Denis
Parry, Robert


Blenkinsop, Arthur
Heffer, Eric S.
Pavitt, Laurie


Boothroyd, Miss Betty
Hooley, Frank
Pendry, Tom


Boyden, James (Bish Auck)
Horam, John
Penhaligon, David


Bradley, Tom
Howell. Rt Hon Denis (B'ham, Sm H)
Phipps, Dr Colin


Bray, Dr Jeremy
Howells, Geraint (Cardigan)
Prescott, John


Brown, Hugh D. (Provan)
Hoyle, Doug (Nelson)
Price, C. (Lewisham W)


Brown, Robert C. (Newcactle W)
Huckfield, Les
Price, William (Rugby)


Brown, Ronald (Hackney S)
Hughes, Robert (Aberdeen N)
Radice, Giles


Buchan, Norman
Hughes, Roy (Newport)
Richardson, Miss Jo


Buchanan, Richard
Hunter, Adam
Roberts, Gwilym (Cannock)


Callaghan, Jim (Middleton &amp; P)
Irvine, Rt Hon Sir A. (Edge Hill)
Robertson, George (Hamilton)


Campbell, Ian
Irving, Rt Hon S. (Dartford)
Robinson, Geoffrey


Canavan, Dennis
Jackson, Colin (Brighouse)
Roderick, Caerwyn


Carmichael, Neil
Jackson, Miss Margaret (Lincoln)
Rodgers, George (Chorley)


Carter, Ray
Janner, Greville
Rodgers, Rt Hon William (Stockton)


Carter-Jones, Lewis
Jay, Rt Hon Douglas
Rooker, J. W.


Cartwright, John
Jeger, Mrs Lena
Roper, John


Clemitson, Ivor
Jenkins, Hugh (Putney)
Rose, Paul B.


Cocks, Rt Hon Michael (Bristol S)
John Brynmor
Ross, Stephen (Isle of Wight)


Cohen, Stanley
Johnson, Walter (Derby S)
Ross, Rt Hon W. (Kilmarnock)


Cook, Robin F. (Edin C)
Johnston, Russell (Inverness)
Rowlands, Ted


Corbett, Robin
Jones, Alec (Rhondda)
Ryman,John


Cowans, Harry
Jones, Dan (Burnley)
Sandelson, Neville


Craigen, Jim (Maryhill)
Judd, Frank
Sedgemore, Brian


Crawshaw, Richard
Kaufman, Rt Hon Gerald
Selby, Harry


Cronin, John
Kerr, Russell
Sever, John


Crowther Stan (Rotherham)
Kilroy-Silk, Robert
Shaw, Arnold (llford South)


Cunningham, G. (Islington S)
Kinnock, Neil
Sheldon, Rt Hon Robert


Cunningham, Dr J. (Whiteh)
Lambie, David
Shore, Rt Hon Peter


Dalyell, Tam
Lamond, James
Short, Mrs Renée (Wolv NE)


Davidson, Arthur
Latham, Arthur (Paddington)
Silkin, Rt Hon S. C. (Dulwich)


Davies, Bryan (Enfield N)
Lee, John
Silverman, Julius


Davies, Rt Hon Denzil
Lestor, Miss John (Eton &amp; Slough]
Skinner, Dennis


Davies, Ifor (Gower)
Lever, Rt Hon Harold
Smith, Cyril (Rochdale)


Davis, Clinton (Hackney C)
Lewis, Ron (Carlisle)
Smith, Rt. Hon. John (N Lanarkshire)


Deakins, Eric
Litterick, Tom
Snape, Peter


Dean, Joseph (Leeds West)
Loyden, Eddie
Spriggs, Leslie


de Freitas, Rt Hon Sir Geoffrey
Lyon, Alexander (York)
Stallard, A. W.


Dell, Rt Hon Edmund
Mabon, Rt Hon Dr J. Dickson
Stott, Roger


Dempsey, James
McCartney, Hugh
Strang, Gavin


Dewar, Donald
McDonald, Dr Oonagh
Strauss, Rt Hon G. R.


Doig, Peter
McElhone, Frank
Swain, Thomas


Dormand, J. D.
MacFarquhar, Roderick
Thomas, Dafydd (Merioneth)


Douglas-Mann, Bruce
McGuire, Michael (Ince)
Thomas, Jeffrey (Abertillery)


Dunnett, Jack
MacKenzie, Rt Hon Gregor



Dunwoody, Mrs Gwyneth
McMillan, Tom (Glasgow C)
Thomas, Mike (Newcastle E)


Dunwoody, Mrs Gwyneth
McNamara, Kevin
Thomas, Ron (Bristol NW)


Eadie, Alex
Madden, Max
Thome, Stan (Preston South)


Edge, Geoff

Thorpe, Ft Hon Jeremy (N Devon)



Edwards, Robert (Wolv SE)



Ellis, John (Brigg &amp; Scun)
Magee, Bryan Mallalieu, J. P. W.
Tierney, Sydney


English, Michael
Marks, Kenneth
Tilley, John


Evans, Fred (Caerphilly)
Marshall, Dr Edmund (Goole)
Tinn, James


 Evans, Gwynfer (Carmarthen)
Marshall, Jim (Leicester S)
Tomlinson, John


Evans, loan (Aberdare)
Mason, Rt Hon Roy
Tomney, Frank


Evans, John (Newton)
Maynard, Miss Joan
Torney, Tom


Ewing, Harry (Stirling)
Meacher, Michael
Urwin, T. W.


Fernhough, Rt Hon E.
Mellish, Rt Hon Robert
Walker, Harold (Doncaster)


Flannery, Martin
Mikardo,Ian
Watkinson, John


Fletcher, Ted (Darlington)
Millan, Rt Hon Bruce
Weetch, Ken


Foot, Rt Hon Michael
Miller, Dr M. S. (E Kilbride)
Weitzman, David


Ford, Ben
Mitchell, Austin (Grimsby)
White, Frank R. (Bury)


Fowler, Gerald (The Wrekin)
Mitchell, R. C. (Solon, Itchen)
White. James (Pollok)


Fraser, John (Lambeth, N'w'd)
Mollcy, William
Whitehead. Phillip


Freeson, Rt Hon Reginald
Moonman, Eric
Whitlock, William


Freud Clement
Morris, Alfred (Wythenshawe)
Willey, Rt Hon Frederick


Garrett, John (Norwich S)
Morris, Rt Hon Charles R.
Williams, Rt Hon Alan (Swansea W)

Williams, Rt Hon Shirley (Hertford)
Woodall, Alec



Williams, Sir Thomas (Warrington)
Woof, Robert
TELLERS FOR THE NOES:


Wilson, William (Coventry SE)
Wrigglesworth, Ian
Mr. Thomas Cox and


Wise, Mrs Audrey
Young, David (Bolton E)
Mr. Ann Taylor

Question accordingly negatived.

Mr. Deputy Speaker (Sir Myer Galpern): New clause no. 12—not moved.

Mr. Newton: On a point of order, Mr. Deputy Speaker. Is it in order for any hon. Member to move the new clause?

Mr. Deputy Speaker: Only a Member who is a signatory to the new clause.

Mr. Newton: Is it in order for me to sign the new clause?

Mr. Deputy Speaker: No.

New Clause No. 20

DEVELOPMENT LAND TAX—EXTENTION OF INTERIM PERIOD

Section 13 of the Development Land Tax Act 1976 shall have effect and shall be deemed always to have had effect as if the date in subsection (1) of that section was 31st March 1980.'—[Mr. Ian Stewart.]

Brought up, and read the First time.

Mr. Ian Stewart: I beg to move, That the clause be read a Second time.
Last year in the Committee stage on the Finance Bill the Opposition introduced a new clause which led to a major alteration in the arrangements for development land tax, in that case relating to the taxation of pre-let developments. This year in Committee I moved new clause no. 15, as it then was, which has led to a further important change in the arrangements for development land tax. The subject of the new clause—which is essentially repeated in new clause no. 20, which we are now considering—is to extend the interim period during which the rate of tax on realised development value up to a figure of £150,000 in any one year is at the lower rate of 66⅔ per cent. rather than the 80 per cent. which is the standard full rate for the tax.
New clause no. 15, moved in Committee, suggested that a further extension of time of three years should be provided from March 1979 when, under the present

terms of the Development Land Tax Act 1976, this interim period will expire. In our debate on this matter the Minister of State in part agreed with the case put forward, but he made two significant reservations. The first was that the extension should be for only one year, from 1979 to 1980, instead of to 1982, and secondly that the change should not be brought about until the Finance Bill in the spring of 1979.
The purpose of new clause no. 20 is to give effect to this undertaking by the Minister of State but without an unnecessary year's delay. I shall not now repeat in detail the arguments that I put in Committee, but I think it might be right, for the record, briefly to outline the background.
The development land tax was introduced in 1976 with this basic rate of 80 per cent., with the intention that it should rise to 100 per cent. at some future time in relation to the progress of the community land scheme, but that is probably in the far distance. In the meantime, 80 per cent. is the basic effective rate. But on the first £150,000 of development value a concessionary rate of 66⅔ per cent. was introduced for the first three years of the development land tax in operation, in order, as was explained at the time, to encourage those who owned land which might be suitable for development to bring it forward before the higher rate applied from April 1979 onwards.
What has happened in these three years. which are so nearly up, is that there has been quite a lack of development because of the economic circumstances of the time, and also because such development as has taken place has largely been by the use of land which was held by developers before the introduction of development land tax, and which therefore was exempted from it.
Since the collapse of the property and development market in 1974, we have some four years of backlog of development, and this backlog will need to be made up. Many bodies and developers have expressed the opinion that the high rates of development land tax are now beginning to bite seriously and to be a


deterrent to the bringing forward of suitable land for further development projects. There was a very effective submission, from which I quoted in Committee, from the Royal Institution of Chartered Surveyors, and that body is very far from being alone in stressing the strength of the case.
The bulk of transactions under development land tax to date have fallen within the £150,000 band, and therefore at the lower rate. I believe that to move to an 80 per cent. rate for development land tax in the near funture, whether in 1980 rather than 1979 or otherwise, would have the effect of creating an artificial shortage of building land, and would force up the overall cost of land and, as a result, also the prices of houses, factories, and so on.
This point was partially taken by the Government in extending the concession to 1980, but why is it necessary to wait until next year's Finance Bill in order to achieve this? Surely certainty is needed in our tax legislation. Transactions of th kind which fall to be taxed under development land tax often take six months, nine months or more to organise, therefore some of those which are in hand now may not even come to completion until after the expiry date of 31st March 1979 as it stands at present in the Bill.
If we were to have a spring Budget next year in April with perhaps the Finance Bill in April or May which was debated in June and July, and perhaps enacted at the end of July, by then it would be necessary to have a retrospective provision covering the period which had elapsed from 31st March 1979. At the time the Finance Bill was published, the rate in law for all development land tax would then be 80 per cent. By not dealing with it in this year's Finance Bill, it seems to me that we are creating a needless extra area of doubt and complexity in what is already a very difficult and incomprehensible tax.
I suggest that the remedy lies in the hands of the Government, by accepting this new clause to this year's Finance Bill, well in advance of the time when it will have to come into operation. I therefore commend the new clause to the House.

Mr. Denzil Davies: The hon. Gentleman correctly said that in Committee I

had given an undertaking that the Government would introduce legislation next year to extend the period of relief for development land tax in respect of the first £150,000 for another year. The Opposition have tabled this new clause to incorporate that particular undertaking in this year's Finance Bill. As I said in Committee, it was not strictly necessary to do it until next year, but I have no objection if the Opposition wish it to be in the Bill this year. Therefore, I am very happy to accept the new clause.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause No. 21

CONSORTIUM RELIEF

'(1) In section 258 of the Taxes Act (group relief)—
(a) after subsection (2)(a) there shall be inserted—
(aa) where the surrendering company is a member of a consortium and the claimant company is a trading company which is owned by the consortium and which is not a 75 per cent. subsidiary of any company";
(b) after subsection (2)(b) there shall be inserted—
(bb) where the surrendering company is a member of a consortium and the claimant company is a trading company—

(i) which is a 90 per cent. subsidiary of a holding company which is owned by the consortium, and
(ii) which is not a 75 per cent. subsidiary of a company other than the holding company";
(c) After subsection (2)(c) there shall be inserted—
(cc) where the surrendering company is a member of a consortium and the claimant company is a holding company which is owned by the consortium and which is not a 75 per cent. subsidiary of any company".

(2) In consequence of subsection (1) above, the Taxes Act shall be amended as follows—
(a) at the end of the proviso to subsection (2) of section 258 (group relief) there shall be added the words "and provided that no claim may be made by a company which is owned by a consortium or which is a 90 per cent. subsidiary of a holding company owned by a consortium either if a profit on a sale of the share capital of the claimant or holding company which is owned by the surrendering company would be treated as a trading receipt of that company or if the


surrendering company's share in the consortium in the relevant accounting period of the claimant or holding company is nil";
(b) in section 259 of the Taxes Act (kinds of group relief) after subsection (8) there shall be inserted—
(9) In applying any of the preceding subsections in the case of a claim by a company which is owned by a consortium or by a company which is a 90 per cent. subsidiary of a holding company owned by a consortium where the surrendering company is a member of the consortium, the loss referred to in subsection (1) above or the excess referred to in subsection (2) or (3) or (6) above, as the case may be may be set off against only a fraction of the total profits of the claimant company, and that fraction shall be equal to the surrendering company's share in the consortium, subject to any further reduction under section 261(2) below.";
(c) in subsection (5) of section 263 (exclusion of double allowances etc.) after the words "as respects a claim for group relief made by a company as a member of a consortium" there shall be added the words "or as a company owned, or a 90 per cent, subsidiary of a holding company owned, by a consortium";
(d) in subsection (2) of section 264 (claims and adjustments) after the words "a claim for group relief by a company as a member of a consortium" there shall be added the words "or as a company owned, or a 90 per cent. subsidiary of a holding company owned, by a consortium".

(3) In consequence of subsection (1) above the Finance Act 1973 shall be amended as follows—

(a) in subsection (3) of section 28 (group relief: qualifications for entitlement) after the words "surrendering company" where those words first occur there shall be inserted the words "in the case of a claim for group relief made by a company as a member of a consortium, or the claimant company in the case of a claim for group relief made by a company owned, or a 90 per cent. subsidiary of a holding company owned, by a consortium" and in each of paragraphs (a), (b) and (c) there shall be inserted after the words "surrendering company" the words "or claimant company, as the case may be.";
(b) at the end of subsection (4) of section 28 there shall be added the words "and in any case where the claimant company is a subsidiary of a holding company which is owned by a consortium, for references in subsection (3) above to the claimant company there shall be substituted references to the holding company';
(c) in subsection (2) of section 29 (group relief: effect of arrangements for transfer of company to another group, etc.)—

(i) in paragraph (a) after the words "the trading company" there shall be inserted the words "or a member of the consortium" and
(ii) for the words "(as the surrendering company) fall" onwards there shall be

substituted the words "fall within any of paragraphs (a) to (cc) of subsection (2) of section 258 of the Taxes Act (the cases where group relief is allowed for a consortium)".

(4) This section applies to accounting periods ending after 11th April.'.—[Mr. Cope.]

Brought up, and read the First time.

Mr. Cope: I beg to move, That the clause be read a Second time.
This new clause proposes to introduce a consortium group relief. It is one which was introduced in Committee in much the same form and which led to a tied vote when it was debated on 27th June. On that occasion there were 15 votes in each direction, hence the reappearance of the same new clause on Report.
I think that it is well understood by those hon. Members who served on the Committee, but perhaps for the benefit of those who did not I should explain briefly what it is about. It emanates primarily from the shipping industry, although it does not apply only to it. The fact is that at present group relief can operate only between members of a group where there is a 75 per cent. relationship in the shareholding of the group. When it does operate, losses can be surrendered in any direction. That is to say, if a parent or subsidiary company makes a loss, whereas the others in the group make a profit, the tax which those profitable companies would make is reduced by the amount of tax which is allowed for the losses made by the other companies in the group.
But in the case of a consortium this relief does not apply. In some cases the shipping industry uses the consortium form of organisation, and one particularly well-known example—Overseas Containers Ltd.—is mentioned in connection with this new clause. That is also the prime reason for the new clause being put forward, because it is a particularly hard case as things stand at present.
When we discussed this matter in Committee, the Minister of State, Treasury, undertook that the Government would in due course look at this, but he did not give any undertaking as to what would happen. He emphasised the difficulties and said that they would look at it in the course of the next year in what the


Committee took to be a rather relaxed and not very positive fashion. At the time it seemed to me, and to some of my hon. Friends, that the principal criterion to be adopted in looking at this was whether only this one company was affected or whether a large number of companies were affected. It seemed to me then, and still does now, that even if only one company is affected that in a sense emphasises the need to introduce this new clause, because it means that it is even more of a hard case than if a large number of companies were in the same position.
Of course, if in the interval since 27th June the Treasury has discovered that a large number of companies are affected, that strengthens the argument for this provision. I accept that the interval between 27th June and now is not a very long interval. But that is not our fault. The Government have been determined to push this Bill along. That is part of the reason, but another part of the reason is the quirk of parliamentary procedure which dictates that new clauses should be taken last in Committee and first on Report. This inevitably increases the gap where two new clauses are involved by comparison with two amendments. Nevertheless, this is not a complicated matter, although the new clause appears to be complicated. I hope that we shall hear something a little more positive from the Financial Secretary—

Mr. Cronin: As the new clause seems to affect entirely Overseas Containers Limited, will the hon. Gentleman be a little more specific, for the benefit of those hon. Members who did not serve in the Committee, and say exactly what the grievance is in regard to this company?

Mr. Cope: I apologise if I did not explain it adequately. Let us suppose that there are two companies in a group. If one makes a loss and the other makes a profit, the two are looked at together in order to arrive at the taxation liability. In the case of a consortium, and Overseas Container Limited is one example. although there may be others, if one company makes a loss and the other makes a profit they are looked at separately and tax is payable, even though there may he a big loss. Overseas Containers Limited has been profitable and

its parents have not always been profitable. But in other cases the reverse might apply. The difficulty of the tax law as it stands at present is that the losses cannot be offset against the profits in the other parts of what is to all intents and purposes a group, except that it is organised in a consortium.
It is true that there may be a way out in terms of adjusting the organisation of a consortium which is affected in this way by turning it into a partnership or something such as that. But that has other consequences as well. The argument which we put forward in Committee not only on this new clause but on others as well was that the tax law of itself should as far as possible not force people to set up their businesses in one way or another in order to minimise their tax liability.
To put it the other way round, there should be no accidental tax penalty because a business is organised in one way instead of another. Businesses should be free to take the decision about which way they organise their affairs, and which way they set up their groups, as may be best for their own commercial success. Of course, shipping companies in particular at present operate in very difficult world markets, and the last thing they need is to have behind them ail kinds of tax complications which hobble them in the way in which they can set up their structures. This is another important point which underlies the new clause.
Therefore, I commend the clause to the House, and I hope that it will commend itself to the Government.

Mr. Graham Page: There seems to be an injustice here between those who set up a consortium and those who merely come together in simple groups.
We have been discussing the example of the shipping companies because this is perhaps the largest case of which we know at present and, indeed, the most successful. A consortium occurs when a number of companies, which I call the parent companies, give birth to a trading company, the consortium company, the share capital in which is owned by the parent companies but none of them owning more than 75 per cent. of the consortium company.
If there is a loss by the consortium company, that can be transferred to the parent companies. That was very satisfactory when the consortium started. The shipping companies in the one which we are considering thought that perhaps the consortium might not be as successful as it has been, and the transfer of losses from the consortium to the parent companies was a reasonable method of grouping their trading.
What has happened, however, is that the consortium has been extremely successful in its container traffic, whereas the business of the parent companies has dropped off. I do not say that there is failure or anything of that sort, but general shipping for the ordinary liner company is not as good as it was when the consortium was formed.
This is of special concern in my constituency, where we have the biggest container dock in the country—the Royal Seaforth—which is proving a great success. But it would not have proved such a success, I believe, had the companies had to rely on mere grouping. In grouping, they can pass the losses one way and another without restriction. There is no question of not passing them from one company to another. They can go either way amongst the companies in the group. But the disadvantage of mere group trading is that there is not one firm company like the consortium company with sufficient resources in itself to carry on such a substantial trade and, of course, the container traffic trade is capital intensive. It has had to be to get the container traffic going.
I cannot see that there can be an opportunity here for tax avoidance. The clause is merely recognising the movement of losses between companies which are trading very closely together. It is a recognised practice where they are merely joining in groups and carrying on group trading, and there seems no reason why that practice should not be recognised when the form of grouping is by means of a consortium in which the parent companies own the shares but none more than 75 per cent.
There is in the clause a provision to prevent tax avoidance by the fact that the movement of losses can be only the amount of the interest of the parent companies in the consortium. I think that

that is a complete protection against a flood of tax avoidance.
If this consortium practice spreads amongst other trading, nothing but benefit can come of it. It is used outside the shipping world at present, but not to the extent that it is in the shipping world. If the clause is accepted, it may be that it will be of advantage to other traders to form consortia of this kind. There will be no loss to the Revenue over it, but there will be justice between the consortium system and the simple group.
I hope that the House will accept the clause.

8.15 p.m.

Mr. Pardoe: The clause is identical to one which I moved in Committee. The fact that my name is not appended to it does not mean that I do not support it now. It is merely because there are six names there already, and there is no room for a seventh. I support the clause fully, and I think that the arguments for it which were put forward in Committee and those which have been adduced today are unanswerable.
The main question which the Government have to answer is whether they want consortia to be formed and whether they believe that it is a reasonable way of conducting business. Certainly I do. Do they want to force consortia which now exist into forming partnerships or groups for the sole reason not of business efficiency or of winning more world trade but simply that they have to take advantage of existing tax provisions? That is the nub of the issue.
If the consortium which we are discussing—and as far as I know there is only one—were to form itself into a partnership, it would have certain business consequences which might not be good for the future of British shipping. However, it may be forced to do so unless some such clause as this is put into the Bill.
In Committee, we had a sort of half-undertaking from the Government to look at the clause again and possibly to try to meet the arguments in support of it next year. As I remember it, the Government said that the concession which this clause sought for consortia was greater than the allowances given to groups. That was never my intention in


moving the clause. Therefore, we suggested to the Government that they should come back on Report with their own amendment to solve the problem. The Government have had to time to do that, and I hope that we shall hear a rather more forthcoming response to the clause on this occasion than we had in Committee.

Mr. Eric Ogden: The arguments of the hon. Member for Gloucestershire, South (Mr. Cope), the right hon. Member for Crosby (Mr. Page) and the hon. Member for Cornwall, North (Mr. Pardoe) have followed each other and, as I understand them, have extended the case in support of the clause.
The hon. Member for Gloucestershire, South concentrated almost exclusively on the shipping interests. When he used those three magic letters "OCL"—the successor to a shipping company to which I once belonged, the Blue Funnel Line of Liverpool, which will be familiar to the right hon. Member for Crosby—he did a great deal more to persuade me to support his clause than his long and complicated argument did.
Then the right hon. Member for Crosby said that the clause was not only about shipping. He said that it was about consortia and trading companies and that perhaps it should be carried into other spheres of activity. Finally, the hon. Member for Cornwall, North said that of course it should be carried into other spheres of activity.
The case seems to have been developed, not only as an argument for shipping, and not only as an argument for shipping and possibly for other activities, but finally, most certainly, for other activities.
I am wholly in favour of trying to help shipping companies in this legislation. I am not certain at this stage how far that ought to go into other activities.

Mr. Brooke: The argument deployed by my hon. Friend the Member for Gloucestershire, South (Mr. Cope) and supported by my right hon. Friend the Member for Crosby (Mr. Page) and the hon. Member for Cornwall, North (Mr. Pardoe) arose because the case for rejecting the new clause in Committee was that it applied only to shipping. Today,

I think that we have tried to demonstrate that the case can go beyond shipping even though shipping was the example which my hon. Friend the Member for Gloucestershire, South urged most strongly.

Mr. Ogden: That is helpful, yet unhelpful. If I could be persuaded to support a limited degree of help for shipping, I might not want to be open then to helping many other industries which did not need it so much. If I am told that there is a case for shipping, and if we can find the right form of words to help shipping but at the same time ensuring that until the following case is proved it is for shipping only, I shall be inclined to support the clause.

Mr. Cope: I am sorry if any impression which I gave damages the hon. Member's support for the clause. I am sorry if the impression gained by the hon. Member was that I intended the new clause to apply only to shipping or to OCL. That was the example given in Committee, and I adopted that example because it was a very good one. But I do not propose this clause purely as a means of helping one company or the shipping industry as a whole. The case for the clause is a wider one than that and, if the shipping industry is in need of assistance, I should prefer it not to get assistance in this backhanded way through the tax system. I should prefer it to be done in a more direct way. However, that is another matter.

Mr. Ogden: But the only alternative to us tonight is this way by this amendment. It is that or nothing. Shipping needs help and if the Minister possibly can I hope that he will find himself able to help it in this way.

Mr. Ian Stewart: I do not want to repeat the points that have been made already, but we should be aware of the nature of this problem.
It is true that in the debates upstairs in Committee one of the points that the Government made for not accepting our new clause was that only one case—that of OCL—had come to the notice of the Inland Revenue. I am advised that OCL is only one example of the need for a change in the law. I believe that there are at least four other consortia in the shipping industry in the United Kingdom.


These encompass the entire range of the British liner fleet which is the largest and most competitive in the world. Therefore, this is of enormous importance to our economy and to us as a trading nation.
The point of the new clause is, as my hon. Friend the Member for Gloucestershire, South (Mr. Cope) said, that of principle rather than actual cases. I believe that the CBI has also pressed this matter on a number of occasions during the past few years because it believes that the problem could apply to other industries such as oil and nuclear power. For that reason, I believe that the Government should firm up their willingness to show sympathy for this case.
Why does a consortium of this kind come about? Probably because there have been major changes in technology and scale in the industries concerned. This makes it necessary for more than one and possibly several of the major operators in a particular field to combine their resources, experience, skills and financial backing to launch a considerable innovation. For example, the whole business of container shipping was a development from the old liner and freight operations.
Since it is becoming more widely recognised that there is this major disadvantage to setting up consortia on this basis, it is probable that others will not come about in other industries. Consortia came about in shipping which has had a bad time, and therefore many of the parent companies have suffered losses which cannot be relieved by the profits of their common consortium.
If there are other major changes in industries such as heavy engineering, motor cars, oil and nuclear power there could be examples of older technologies finding it more and more difficult to make profits but still having the resources to pool for a major step forward. This would be important for the economy as a whole. If this problem over taxation of consortia continues it will be a deterrent to this happening. The only other possibility would be an amalgamation of all the companies concerned which would inevitably mean a concentration of vast and sometimes disparate interests, for other purposes.
This case is very critical for OCL. Up to now the problem affects only shipping

and so the effect of the clause would be concentrated on shipping. However, it would be wrong to deceive ourselves that it could not be of wider application. It is hard to measure the deterrent effect of a piece of legislation which put a certain course of action out of court. Once it is noticed in industry that there are major tax disadvantages in a certain way forward, it is hardly surprising if other exemples do not come about. The limited application of the clause at the moment should not blind us to other possibilities in the future.

Mr. Cronin: The hon. Member for Gloucestershire, South (Mr. Cope) moved the new clause most lucidly. I hope that he did not think that my intervention meant anything to the contrary.
I am a little concerned about the new clause, and I hope that the Financial Secretary will explain its effects. Generally, corporations seem to have rather favourable taxation treatment. Certainly on this side of the House we should look with some doubt at giving corporations further tax advantages.
The problem of consortia could be overcome by using a different method altogether—a different form of capital structure, by amalgamation. It is not necessary to have this favourable treatment. I am particularly worried that it seems to open the door to all kinds of companies to obtain tax advantages in future by using the mechanism of consortia. That would be eroding the Revenue's receipts to a substantial extent.
If a company which is in a consortium is successful and the parent company is unsuccessful, there is no reason, either economically or in the national interest, why the parent company should be, in effect, subsidised by the Revenue. Although I would not go so far as to say that I object to the new clause, or indeed to anything that helps British shipping, I believe that OCL is a deserving case and a good example of a consortium. However, I am concerned whether this provision will be an open door to all kinds of taxation abuse.
Will the Minister consider whether these provisions should apply only to shipping and to nothing else? Nobody has yet put forward any argument for this mechanism to be used for anything other than shipping.

8.30 p.m.

Mr. Arthur Blenkinsop: I intervene only briefly, and I apologise to the House for coming in late.
In common with other hon. Members with shipping interests in their constituencies, I have had various representations on this subject. I do not wish to say that all hon. Members have been wholly convinced by the arguments advanced, but I believe that strong sympathy has been expressed in the present situation. Those affected argue that by reconstituting themselves as a partnership these benefits could be obtained in any case. Clearly, there are great disadvantages for such firms in taking this action on one side, and that has to be weighed against the loss suffered in tax terms. It would be serious if a less satisfactory way of conducting business was in a sense forced upon them against their wish and against their natural trading desire, if that could reasonably be avoided.
On the other hand, I appreciate that we are dealing with considerable sums of money, and no doubt there will be implications in other areas. I emphasise that there is real concern on this matter and that everybody is anxious to find a satisfactory solution.

Mr. Brooke: In responding to the remarks of the hon. Member for Loughborough (Mr. Cronin), I believe that there is a problem involving organisation. It is desirable that a company's organisation should mirror the objectives of the organisations that participate in it. The hon. Member for South Shields (Mr. Blenkinsop) said that there would be offsetting disadvantages in moving to a partnership basis. I agree with him that there are disadvantages and obviously considerable expense would result.
It seems ironical that we should be making consortium arrangements unattractive at exactly the moment when in the Middle East we have seen how relevant consortium arrangements are in carrying out business in that area. Although the examples of consortia quoted in the shipping world may be composed of British companies, there will be other circumstances in which British companies may participate in a consortium consisting of companies of mixed nationalities. It would be a pity if British companies were put at a disadvantage in

entering that kind of arrangement because that participant suffered from different tax arrangements compared with the other participants.

Mr. David Hunt: I apologise for the fact that I was not in the Chamber to hear the start of the debate, but wish to make what I believe to be a few important points about a crucial new clause so far as it affects shipping.
The anomaly created by the existing law is quite easily overcome by this clause in a most harmless way. At present the business of liner shipping is facing a number of important and strategic obstacles which are making life extremely difficult.
In an earlier debate on shipping we had a lengthy exposition of the Russian threat as it affects liner shipping. The Minister in that debate said that firm action was now being taken to protect British shipping and in particular the liner trades. Unless this clause is passed, one of the country's major liner shipping groups, OCL, will be in a most difficult position. If the new clause is defeated. OCL will be forced to take certain steps that will be detrimental to that company. If it is necessary for OCL to become a partnership, as already mentioned, then it would not, as it does now, own its ships or have independent control of its own finances and policies.
In the shipping industry the consortium is a vital form of organisation because it enables companies to come together with a wide variety of interests to mount a joint operation in a particular trade or trades. Yet at the same time it allows the parent companies to maintain their separate identities. When a shipping operation is beyond the resources of a single company, the consortium arrangement can provide the capital investment on the scale required. This is where Overseas Containers Limited is so important. The company was formed in the late 1960s and suddenly now finds itself in this difficult position wholly as a result of an absurd anomaly that the new clause seeks to put right.
I do not want the House to underestimate the importance of the new clause to the liner industry and to shipping generally. Let me repeat the facts. OCL operates a fleet of 15 cellular container ships on trade routes linking the United


Kingdom and Europe with Australia, New Zealand, the Far East and southern Africa. The fleet and its associated terminals ashore represent an investment of nearly £500 million. In fact, OCL is the largest British liner company and probably the largest ocean liner group in the world. Last year it delivered more than 250,000 containers and earned nearly £300 million in freights. It represents about 10 per cent. of the entire British fleet and 25 per cent. of the British liner fleet.
This great company deserves support and should not have its valuable activities damaged by an anomaly that the clause seeks to put right. The proposal would be of great benefit to an important part of the shipping industry in maintaining its ability to cope with some very harsh trading conditions.
The industry has pointed out that if the consortium group relief provisions are not altered some companies may be forced into making the arrangements to which I have referred, which would make their position more difficult and would do what this clause seeks to do in a simpler and more just way. For those reasons, I hope that the House will accept the new clause.

Mr. Robert Sheldon: My hon. Friends the Members for South Shields (Mr. Blenkinsop) and for Liverpool, West Derby (Mr. Ogden) were concerned about the possible effect of the new clause on the shipping industry. My hon. Friend the Member for West Derby asked whether the clause would be confined to shipping. The subsequent debate has answered that question. The arrangements for tax relief for consortia would be widened as a result of the new clause and would apply generally. Shipping is the example selected because of a case in which a number of hon. Members have been taking an interest.
My hon. Friend the Member for Loughborough (Mr. Cronin) pointed out some of the problems that might arise if consortia were to become more popular in the way that a number of Conservative Members, particularly the hon. Member for Hitchin (Mr. Stewart), suggested. The hon. Member for Cornwall, North (Mr. Pardoe) asked the direct question whether it was the Government's intention to force consortia into partnerships or groups by means of tax law. I can tell him that that is not the Government's intention.
I shall make clear where the Government stand on the new clause and in relation to consortia generally, but I shall start by referring to groups and their relationships to consortia so that we may see the two in relation to each other.
Group relief was brought in as a result of considerable pressure. I applied part of it myself in the 1960s because I felt that it was right that groups should be treated for many purposes as single companies. The hon. Member for Gloucestershire, South (Mr. Cope) pointed out that groups may spread relief both tip-wards and downwards. That is quite proper because, to all intents and purposes, their structures are similar to those of single companies operating by means of divisional structure.
Consortia are quite different from groups. They are allowed a certain kind of relief because of the underlying purposes of setting up consortia. In the early years of a consortium there can be losses, but when companies come together in this way they can pool their expertise and financial strength, and provisions for tax relief for consortia therefore allow losses to be set off against the profits of the parent companies. The rule for consortium relief is that no participant can own more than 75 per cent. and that there can be up to five participants. As a result, there is no overlap between consortia, as defined for the purposes of tax relief, and groups, because, of course, the consortium is not comparable to the single company, which is the basic model for the group.
The new clause would introduce a new principle, and it is right that, before we accept so wide ranging a principle, we should give it much closer examination than has been possible between the Committee and Report stages of this Bill. Under existing legislation, the minority shareholder in a group may own up to 25 per cent. of it and still get no group relief. Under the clause, therefore, there would be certain tax advantages for consortia as compared with groups. Clearly, groups are like single companies, while consortia are not. There would, therefore, be a major anomaly if this clause were accepted. It would lead to a need for fundamental changes in group relief to take account of the changes in consortium relief.
We must understand that the kind of examination my right hon. Friend promised is bound to take some time. We need to consider the various ways in which companies can be linked. For example, group relief is available for participants owning more than 75 per cent., while consortium relief is available with up to five participants, none of which can have more than 75 per cent. of the shareholding; the rest of the companies must operate like ordinary shareholders.
There are certain advantages in consortium operation, and I think that it is reasonable that it should be made easier to set up consortia with the tax advantages attaching thereto. But, as I have said, this proposal needs rather more examination than has been possible in the time available.

Mr. Cronin: As this matter practically affects only shipping companies, will my right hon. Friend consider having legislation introduced to confine the relief to shipping companies in the same way as agriculture and forestry, for instance, have relief?

Mr. Sheldon: I was much taken with the comments of the hon. Member for Hitchin, who rightly pointed out that there could be major moves in the direction of consortia now that expertise is often spread over new and important fields. There could be a major move in this direction in that large and powerful firms which in the past would not have needed to operate in this way may now need to do so, in the way foreseen by the hon. Member for Hitchin. If that were to become an important trend—and the hon. Gentleman used good arguments about pooling of the wide range of experience and strength of finance that would be required—there would be a great deal of validity in the case, but this whole matter then becomes quite fundamental, and I do not think that we could have considered it satisfactorily in the short period that we have had.

Mr. Cope: The right hon. Gentleman is speaking as though this matter first appeared in Committee on this Bill. Yet I am advised that the CBI has for a number of years made this point in its submissions to the Chancellor of the Exchequer. The matter has not simply

arisen this year. It has been put before to the Chancellor of the Exchequer.

8.45 p.m.

Mr. Sheldon: It is interesting that it is the only case of its sort to have come before the Inland Revenue and to show the disadvantages to which hon. Members have referred. As the hon. Member for Hitchin observed, the case may be the precursor of others. That is why I think it right to have a wider examination of the sort that I have suggested. It is not a matter that we want to consider hastily. That is mainly because of the implications for group relief. We could find ourselves accepting some anomalies because of the way in which group relief has to operate alongside consortium relief. It is a complicated area. I hope that hon. Members who have some understanding of it will accept that it is right that we carry out an investigation in the manner to which I have referred and return with some further information in time for next year's Budget.

Mr. Ogden: Does my right hon. Friend agree that the organisation of any company, especially a shipping company, should be related primarily to its operations and practice and not to any tax advantage that a system may or may not offer? Is he talking about two inquiries, one into the effect on the industry of the clause or a similar clause—presumably he is having talks with shipping interests—and a much longer one into the possible effects of the clause throughout the whole of British industry, which we cannot expect for another 12 months? Is he thinking of any retrospective legislation? If he decides that shipping should have had help tonight, will he back-date such help until last April? What help is coming?

Mr. Sheldon: I cannot comment on that in advance of the examination that I promise the House. I agree with my hon. Friend when he—fairly—said that taxation should not dictate the operation of the industry. Taxation should, instead. reflect the changes that are needed to make effective the operations of companies.

Mr. Peter Rees: If hon. Members had been under the illusion that we were debating a technical matter of some complexity and little importance, that must


surely have been dispelled by the most interesting debate that has developed.
The Financial Secretary appeared to concede the importance of the principle even though he seemed a little doubtful about its application and how it should be clothed in legislative form. The debate has demonstrated that we are not entirely concerned with the shipping industry. Whether we should be so concerned is another matter. I do not think that we should ever entirely tailor our fiscal legislation to one industry but should be concerned with the wider principles. I hope that it has emerged with clarity that we are not concerned only with one consortium—namely, OCL.
The Financial Secretary did less than justice to the arguments advanced by my hon. Friends when he suggested that there was only one consortium likely to be affected. The right hon. Gentleman cannot possibly say—probably none of us can say—what an inhibiting effect the provisions have had on various other companies, or groups of companies, that might have attempted to adopt a consortium relationship for a certain operation.
Shipping is probably uppermost in our minds. We can pray in aid what was said in the Rochdale report, which suggested that consortia were a useful vehicle for the shipping industry and should be encouraged. I do not think that the right hon. Gentleman devoted any attention to the recommendations contained in the Rochdale report, to which we referred in Standing Committee.
It has emerged clearly from the informed interventions of my hon. Friends that various types of company might well be moved to take advantage of the consortium relationship. It is because of the scale of modern industry and because of the scale of ventures that are undertaken, especially in public works, that very often no one company has the expertise or the capital resources to undertake them, especially in the Middle East. The most obvious vehicle is a consortium.
Not ignoring the speeches made by my hon. Friends, the point was well made by the hon. Members for South Shields (Mr. Blenkinsop) and Liverpool, West Derby (Mr. Ogden) that a business organisation should not be dictated by fiscal considera-

tions. That is the principle underlying the debate. I hope that there is common ground within the House that business organisations should be adopted that are most likely to lead to successful commercial conclusions.
After all, we are no longer such a strong country industrially and commercially that we can afford to discard certain forms of business organisation. They must be encouraged, or at least not deterred, which is what the existing legislation does. I should point out to the Financial Secretary and, indeed, to his hon. Friend the Member for Loughborough (Mr. Cronin) that it is a question not of creating an anomaly or giving consortia special treatment, but of putting them on the same basis as group companies which have a 75 per cent. shareholding relationship. No door is being opened. It is merely, as it were, eliminating an anomaly which affects consortia at present and giving them precisely the same relief as group companies.
The matter was put graphically by my hon. Friend the Member for Gloucestershire, South (Mr. Cope): the losses of companies in the consortium should be surrendered upwards or downwards to one consortium company just as the loss of the consortium company can now be surrendered upwards to the companies which own its shares. That is the way that the relief operates in group companies. We are asking the Government not to accept an anomaly or specially to favour consortia, but to put them in the same position as group companies.
In effect, the Financial Secretary con ceded the principle. Therefore, I am a little surprised that he adopted such an unco-operative and unhelpful attitude. He said that there must be time to consider these matters. As my hon. Friend the Member for Gloucestershire, South pointed out, representations were made months ago. A new clause to this effect stood on the Amendment Paper in Standing Committee. There has been plenty of time had there been the will on the part of the Government.
As we have learned to our cost in many debates, the Financial Secretary is far quicker to impose than to moderate the burden of tax. I hope that my hon. Friend the Member for Hitchen (Mr. Stewart) in order to inject some urgency into the Government's deliberations, will


press this matter to a Division. I hope that it will command support not only on this side, but on the Government side of the House.

Division No. 258]
AYES
[8.53 p.m.


Adley, Robert
Gow, Ian (Eastbourne)
Moate, Roger


Aitken, Jonathan
Gower, Sir Raymond (Barry)
Monro, Hector


Alison, Michael
Grant, Anthony (Harrow C)
Montgomery, Fergus


Arnold, Tom
Gray, Hamish
Moore, John (Croydon C)


Atkins, Rt Hon H. (Spelthorne)
Grieve, Percy
Morgan, Geraint


Atkinson, David (B'mouth, East)
Grylls, Michael
Morgan-Giles, Rear-Admiral


Banks, Robert
Hall-Davis, A. G. F
Morris, Michael (Northampton S)


Beith, A. J.
Hamilton, Archibald (Epsom &amp; Ewell)
Morrison, Charles (Devizes)


Bendall, Vivian
Hamilton, Michael (Salisbury)
Morrison, Hon Peter (Chester)


Bennett, Sir Frederic (Torbay)
Hampson, Dr Keith
Neave, Airey


Bennett, Dr Reginald (Fareham)
Hannam, John
Nelson, Anthony


Benyon, W.
Harrison, Col Sir Harwood (Eye)
Neubert, Michael


Berry, Hon Anthony
Harvie Anderson, Rt Hon Miss
Newton, Tony


Biffen, John
Haselhurst, Alan
Normanton, Tom


Biggs-Davison, John
Hawkins, Paul
Nott, John


Blaker, Peter
Hayhoe, Barney
Onslow, Cranley


Body, Richard
Hicks, Robert
Oppenheim, Mrs Sally


Boscawen, Hon Robert
Hodgson, Robin
Page, John (Harrow West)


Bottomley, Peter
Holland, Philip
Page, Rt Hon R. Graham (Crosby)


Bowden, A. (Brighton, Kemptown)
Hordern, Peter
Page, Richard (Workington)


Boyson, Dr Rhodes (Brent)
Howe, Rt Hon Sir Geoffrey
Pardoe, John


Braine, Sir Bernard
Howell, David (Guildford)
Parkinson, Cecil


Brittan, Leon
Howell, Ralph (North Norfolk)
Pattie, Geoffrey


Brocklebank-Fowler, C.
Howells, Geraint (Cardigan)
Penhaligon, David


Brooke, Hon Peter
Hunt, David (Wirral)
Percival, Ian


Brotherton, Michael
Hunt, John (Ravensbourne)
Pink, R. Bonner


Brown, Sir Edward (Bath)
Hurd, Douglas
Powell, Rt Hon J. Enoch


Buchanan-Smith, Alick
Hutchison, Michael Clark
Prentice, Rt Hon Reg


Buck, Antony
Irving, Charles (Cheltenham)
Price, David (Eastleigh)


Budgen, Nick
James, David
Prior, Rt Hon James


Butler, Adam (Bosworth)
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Pym, Rt Hon Francis


Carlisle, Mark
Jessel, Toby
Raison, Timothy


Chalker, Mrs Lynda
Johnson Smith, G. (E. Grinstead)
Rathbone, Tim


Channon, Paul
Johnston, Russell (Inverness)
Rees, Peter (Dover &amp; Deal)


Churchill, W. S.
Jopling, Michael
Rees Davies, W. R.


Clark, Alan (Plymouth, Sutton)
Joseph Rt Hon Sir Keith
Rhodes James, R.


Clarke, Kenneth (Rushcliffe)
Kabberry, Sir Donald
Rhys Williams, Sir Brandon


Cockcroft, John
Kellett-Bowman, Mrs Elaine
Ridley, Hon Nicholas


Cooke, Robert (Bristol W)
Kershaw, Anthony
Ridsdale, Julian


Cope, John
Kimball, Marcus
Rifkind, Malcolm


Cormack, Patrick
King Evelyn (South Dorset)
Roberts, Wyn (Conway)


Corrie, John
Kitson Sir Timothy
Ross, Stephen (Isle of Wight)


Costain, A. P.
Knight, Mrs Jill
Rost, Peter (SE Derbyshire)


Crowder, F. P.
Knox, David
Royle, Sir Anthony


Davies, Rt Hon J. (Knutsford)
Lamont, Norman
Sainsbury, Tim


Dean, Paul (N Somerset)
Langford-Holt, Sir John
St. John-Stevas, Norman


Dodsworth, Geoffrey
Latham Michael (Melton)
Scott Nicholas


Drayson, Burnaby
Lawrence, Ivan
Scott-Hopkins, James


du Cann, Rt Hon Edward
Lawson, Nigel
Shaw, Giles (Pudsey)


Durant, Tony
Le Marchant, Spencer
Shaw, Michael (Scarborough)


Eden, Rt Hon Sir John
Lester, Jim (Beeston)
Shelton, william (Streatham)


Edwards, Nicholas (Pembroke)
Lewis, Kenneth (Rutland)
Shepherd, Colin


Elliott, Sir William
Lloyd, Ian
Shersby, Michael


Emery, Peter
Loveridge, John
Silvester, Fred


Eyre, Reginald
Luce, Richard
Sims, Roger


Fairbairn, Nicholas
McCrindle, Robert
Sinclair, Sir George


Fairgrieve, Russell
Macfarlane, Neil
Skeet, T. H. H.


Farr, John
MacGregor, John
Smith, Dudley (Warwick)


Fell, Anthony
MacKay, Andrew (Stechford)
Smith, Timothy John (Ashfield)


Finsberg, Geoffrey
McNair-Wilson, M. (Newbury)
Speed, Keith


Fisher, Sir Nigel
McNair-Wilson, P. (New Forest)
Spence, John


Fletcher, Alex (Edinburgh N)
Madel, David
spicer, Jim (W Dorest)


Fletcher-Cooke, Charles
Marshall, Michael (Arundel)
Spicer, Michael (S Worcester)


Forman, Nigel
Marten, Neil
Sproat, Iain


Fox, Marcus
Mates, Michael
Stainton, Keith


Fraser, Rt Hon H. (Stafford &amp; St)
Mather, Carol
Stanbrook, Ivor


Gardiner, George (Reigate)
Maude, Angus
Stanley, John


Gardner, Edward (S Fylde)
Maxwell-Hyslop, Robin
Steen, Anthony (Wavertree)


Gilmour, Sir John (East Fife)
Mayhew, Patrick
Stewart, Ian (Hitchin)


Glyn, Dr Alan
Meyer, Sir Anthony
Stokes, John


Godber, Rt Hon Joseph
Miller, Hal (Bromsgrove)
Stradling Thomas, J.


Goodhart, Philip
Mills, Peter
Tapsell, Peter


Goodlad, Alastair
Miscampbell, Norman
Taylor, R. (Croydon NW)


Gorst, John
Mitchell, David (Basingstoke)
Taylor, Teddy (Cathcart)

Question Put, That the clause be read a Second time:—

The House divided: Ayes 244, Noes 268.

Tebbit, Norman
Viggers, Peter
Wiggin, Jerry


Temple-M[...], Peter
Wakeham, John
Winterton, Nicholas


Thatcher, Rt Hon Margaret
Walder, David (Clilheroe)
Wood, Rt Hon Richard


Thomas, Rt Hon P. (R[...]ndon S)
Walker, Rt Hon P. (Worcester)
Younger, Hon George


Townsend, Cyril D.
Walker-Smith, Rt Hon Sir Derek



Trotter, Neville
Warren, Kenneth
TELLERS FOR THE AYES:


van Straubenzee, W. R.
Weatherill, Bernard
Sir George Young and


Vaughan, Dr Gerard
Wells, John
Lord James Douglas Hamilton.


NOES


Abse, Leo
Ewing, Harry (Stirling)
MacFarquhar, Roderick


Allaun, Frank
Faulds. Andrew
McGuire, Michael (Ince)


Anderson, Donald
Fernyhough, Rt Hon E.
Mackenzie, Rt Hon Gregor


Armstrong, Ernest
Fitch, Alan (Wigan)
McMillan, Tom (Glasgow C)


Ashley, Jack
Flannery, Martin
McNamara, Kevin


Ashton, Joe
Fletcher, Ted (Darlington)
Madden, Max


Atkins, Ronald (Preston N)
Foot, Rt Hon Michael
Magee, Bryan


Atkinson, Norman (H'gey, Tott'ham)
Ford, Ben
Mallalieu, J. P. W.


Bagier, Gordon A. T.
Fowler, Gerald (The Wrekin)
Marks, Kenneth


Barnett, Guy (Greenwich)
Fraser, John (Lambeth, N'w'd)
Marshall, Dr Edmund (Goole)


Barnett, Rt Hon Joel (Keywood)
Freeson, Rt Hon Reginald
Marshall, Jim (Leicester S)


Bates, All
Garrett, John (Norwich S)
Mason, Rt Hon Roy


Bean, R. E.
Garrett, W. E. (Wallsend)
Maynard, Miss Joan


Bennett, Andrew (Stockport N)
George, Bruce
Meacher, Michael


Bidwell, Sydney
Gilbert, Rt Hon Dr John
Mellish, Rt Hon Robert


Bishop, Rt Ron Edward
Ginsburg, David
Mikardo, Ian


Blerkirsop, Arthur
Golding, John
Millan, Rt Hon Bruce


Boothroyd, Miss Betty
Gould, Bryan
Miller, Dr M. S. (E Kilbride)


Boyden, James (Bish Auck)
Gourlay, Harry
Mitchell, Austin (Grimsby)


Eradley, Tom
Grant, John (Islington C)
Mitchell, R. C. (Soton, Itchen)


Bray, Dr Jeremy
Grocott, Bruce
Molloy, William


Brown, Hugh D. (Provan)
Hamilton, James (Bothwell)
Moonman, Eric


Brown, Robert C. (Newcastle W)
Hamilton W. W. (Central Fife)



Brown, Ronald (Hackney S)
Hardy, Peter
Morris, Alfred (Wythenshawe)




Morris, Rt Hon Charles R.


Buchan, Norman
Harrison. Rt Hon Walter
Morris, Rt Hon J. (Aberavon)


Buchanan, Richard
Hart, Rt Hon Judith
Moyle, Rt Hon Roland


Callaghan, Jim (Middieton &amp; P)
Hattersley, Rt Hon Roy
Murray, Rt Hon Ronald King


Campbell, Ian
Hayman, Mrs Helene
Newens, Stanley


Canavan, Dennis
Healey, Rt Hon Denis
Noble, Mike


Carmichael, Neil
Heller, Eric S.
Oakes, Gordon


Carter, Ray
Henderson Douglas
O'Halloran, Michael


Carler-Jones, Lewis
Hooley, Frank
Orbach, Maurice


Cartwright, John
Horam, John
Orme, Rt Hon Stanley


Clemitson Ivor
Howell, Rt Hon Denis (B ham, Sm H)
Ovenden, John


Cocks, Rt Hon Michael (Bristol S)
Hoyle, Doug (Nelson)



Cohen, Stanley
Hucklield, Les
Owen, Rt Hon Dr David


Coleman, Donald
Hughes, Mark (Durham)
Palmer, Arthur


Concannon, Rt Hon John
Hughes, Robert (Aberdeen N)
Park, George


Cook, Robin F. (Edin C)
Hughes, Roy (Newport)
Parker, John


Corbett, Robin
Hunter, Adam
Parry, Robert


Cowans, Harry
Irvine, Rt Hon Sir A. (Edge Hill)
Pavitt, Laurie


Craigen, Jim (Maryhill)
Irving, Rt Hon S. (Dartford)
Pendry, Tom


Crawshaw, Richard
Jackson, Colin (Brighouse)
Phipps, Dr Colin


Cronin, John
Jackson, Miss Margaret Lincoln)
Prescott, John


Crowther, Stan (Rotherham)
Janner, Greville
Price, C. (Lewisham W)


Cryer, Bob
Jay, Rt Hon Douglas
Price, William (Rugby)


Cunningham, G. (Islington S)
Jeger, Mrs Lena
Radice, Giles


Cunningham, Dr J. (Wh[...]teh)
Jenkins, Hugh (Putney)
Richardson, Miss Jo


Dalyell, Tam
John Brynmor
Roberts, Albert (Normanton)


Davidson, Arthur
Johnson, Jamos (Hull West)
Roberts, Gwilym (Cannock)


Davies, Bryan (Enfield N)
Johnson, Walter (Derby S)
Robertson, George (Hamilton)


Davies, Rt Hon Denzil
Jones, Alec (Rhondda)
Robinson, Geoffrey


Davies, Ifor (Gower)
Jones, Dan (Burnley)
Roderick, Caerwyn


Davis, Clinton (Rackney C)
Judd, Frank
Rodgers, George (Chorley)


Deakins, Eric
Kaufman, Rt Hon Gerald
Rodgers, Rt Hon William (Stockton)


Dean, Joseph (Leeds West)
Kerr, Russell
Rooker, J. W.


de Freitas, Rt Hon Sir Geoffrey
Kilroy-Silk Robert
Roper, John


Dell, Rt Hon Edmund
Kinnock, Nell
Rose, Paul B.


Dempsey, James
Lamble, David
Ross, Rt Hon W. (Kilmarnock)


Dewar, Donald
Lamond, James
Rowlands, Ted


Doig, Peter
Latham, Arthur (Paddington)
Ryman, John


Dormand, J. D.
Leadbitter, Ted
Sandelson, Neville


Duffy, A. E. P.
Lee, John
Sedgemore, Brian


Dunnett, Jack
Lever, Rt Hon Harold
Selby, Harry


Dunwoody, Mrs Gwyneth
Lewis, Ron (Carlisle)
Sever, John


Eadie, Alex
Litterick, Tom
Shaw. Arnold (Ilford South)


Edge, Gerff
Loyden, Eddie
Sheldon, Rt Hon Robert


Edwards, Flobert (Wolv SE)
Luard, Evan
Shore, Rt Hon Peter


Ellis, John (Brigg &amp; Scun)
Lyon, Alexander (York)
Short, Mrs Renée (Wolv NE)


English, Michael
Lyons, Edward (Bradford W)
Silkin, Rt Hon S. C. (Dulwich)


Evans, Fred (Caerphilly)
Mabon, Rt Hon Dr J. Dickson
Silverman, Julius


Evans, Gwynfor (Carmarthen)
McCartney, Hugh
Skinner, Dennis


Evans, Ioan (Aberdare)
McDonald, Dr Oonagh
Smith, Rt. Hon. John (N Lanarkshire)


Evans, John (Newton)
McElhone. Frank
Snape, Peter

Spriggs, Leslie
Tinn, James
Whitlock, William


Stallard, A. W.
Tomlinson, John
Willey, Rt Hon Frederick


Stewart, Rt Hon M. (Fulham)
Tomney, Frank
Williams, Rt Hon Alan (Swansea W)


Stoddart, David
Torney, Tom
Williams, Rt Hon Shirley (Hertford)


Stott, Roger
Tuck, Raphael
Williams, Sir Thomas (Warrington)


Strang, Gavin
Urwin, T. W.
Wilson, Gordon (Dundee E)


Summersklll, Hon Dr Shirley
Walker, Harold (Doncaster)
Wilson, Rt Hon Sir Harold (Huyton)


Swain, Thomas
Walker, Terry (Kingswood)
Wilson, William (Coventry SE)


Taylor, Mrs Ann (Bolton W)
Watkins, David
Wise, Mrs Audrey


Thomas, Dafydd (Merioneth)
Watkinson, John
Woodall, Alec


Thomas, Jeffrey (Abertillery)
Watt, Hamish
Woof, Robert


Thomas, Mike (Newcastle E)
Weetch, Ken
Wrigglesworth, Ian


Thomas, Ron (Bristol NW)
Weitzman, David
Young, David (Bolton E)


Thompson, George
Wellbeloved, James



Thorne, Stan (Preston South)
White, Frank R. (Bury)
TELLERS FOR THE NOES:


Tierney, Sydney
White, James (Pollok)
Mr. Thomas Cox and


Tilley, John
Whitehead, Phillip
Mr. Ted Graham.

Question accordingly negatived.

New Clause No. 23

INSURANCE COMPANIES: DISPOSALS

'(1) This section shall apply where an insurance company so elects in relation to any qualifying assets disposed of after 5th April 1978; and for the purposes of this section—

(a) an insurance company shall be any company falling within the meaning of that expression in section 323 of the Taxes Act and
(b) "qualifying asset"means any asset—

(i) to which subsection (1) of section 112 of the Finance Act 1972 applies not being an asset excluded therefrom by subsection (2) thereof and
(ii) which the insurance company shows to the satisfaction of the inspector of taxes has both been acquired in connection with the issue of policies of insurance being policies in respect of which benefits have been paid on death of the life assured or on maturity surrender or partial surrender thereof prior to 6th April 1978 and been retained in connection with liabilities on other policies.

(2) Paragraph 2 of Schedule 7 to the Finance Act 1965 shall apply as if all qualifying assets of the same class held by the insurance company prior to 6th April 1978 were regarded as indistinguishable parts of one single asset (in this paragraph referred to as the old holding) being a separate asset for the purposes of Part III of the Finance Act 1965 from such qualifying assets of the same class as shall have been acquired after that date.

(3) It shall be assumed in relation to the qualifying assets so disposed of (being an asset forming part of the old holding) that it had on the happening of the event referred to in paragraph (b)(ii) of subsection (1) hereof being sold by the insurance company and immediately reacquired by it at its market value on that date and accordingly the amount of any gain on the disposal of such a qualifying asset shall be the aggregate of

(a) the gain realised on the disposal deemed to have been made on the happening of such an event (in this paragraph referred to as the old gain) and

(b) the gain over the period from that time to the date of the disposal (in this paragraph referred to as the new gain).

(4) The corporation tax charged in relation to the old gain shall be computed as if the disposal giving rise to the old gain had been made in the financial year 1977-78 and shall be reduced by such a credit as would have been applicable in accordance with section 112 of the Finance Act 1972 had the disposal been made in that year and the corporation tax charged in relaion to the new gain shall be reduced by the credit applicable in the year in which the disposal actually takes place.

(5) An election under this section shall be made by notice in writing to the inspector given within three years from the end of the accounting period in which the disposal is made.

(6) Where a member of a group of companies of which the insurance company is one (being a group of companies for the purposes of section 272 of the Taxes Act 1970) either

(a) acquires a qualifying asset as trading stock from the insurance company, the members so acquiring it shall be treated for purposes of paragraph 1 of Schedule 7 to the Finance Act 1965 as having acquired the asset otherwise than as trading stock in all respects as if the acquisition by the insurance company were its acquisition and immediately appropriated it for the purposes of the trade as trading stock and shall (in the absence of any election made under paragraph 1(3) thereof) have the same right to make an election under this section in relation to that qualifying asset as is given to the insurance company or
(b) acquired a qualifying asset otherwise than as trading stock from the insurance company, the member so acquiring it shall be treated in all respects as if the acquisition by the insurance company were its acquisition and shall have the same right to make an election under this section in relation to that qualifying asset as is given to the insurance company.'.—[Mr. Ridley.]

Brought up, and read the First time.

Mr. Ridley: I beg to move, That the clause be read a Second time.
First, I ought to declare an interest as a director of a life assurance company, although I am in no sense liable to benefit from this new clause if it were adopted.
The point is fairly complex, but I shall explain it as briefly as I can. I believe that there is an injustice here. The new policy for taxing capital gains, as set out in clause 36, meets with a similar matching rough justice in relation to the taxation of gains borne by unit trusts and investment trusts in that the amount to be paid in switching is reduced from 17 per cent. to 10 per cent. of the gain. That is acceptable, and there is no problem at all for unit trusts and investment trusts in simply reducing the amount of the tax that they pay, whereas the bond holder or unit holder will increase the amount that he pays from 13 per cent. to 20 per cent. if he realises his bond.
But in life assurance business many policies are linked to bonds, and the problem arises for the life assurance company which places the funds it has acquired from the saver into unit trusts or investment trusts of this sort. The problem is that, when paying out on a claim or a surrender to a policyholder, an insurance company does not, obviously, allocate certain units which it has purchased and sell them coincidentally with the time when it has to pay out to redeem policies. Instead, it pays out from its liquid funds, and when it has to do so it sells more investments in order to maintain its liquidity. So it can occur—indeed it will and has occurred—that although the policyholder will be expecting to have a reduced amount of capital taxes to pay, the insurance company will be lumbered with a much heavier amount of capital tax. It will, therefore, lose because the amount of tax which the insurance company will have to pay will be increased from 13 per cent. to 20 per cent., and it cannot in any sense pass this on to the existing policyholders.
This sum has, therefore, either to be borne out of the profits of the insurance companies, or it has to be passed on to future policyholders, thereby making the burden of one man's tax fall upon another. That cannot be what is required by the Government.
There seems, therefore, to be an injustice which we should seek to remedy. The new clause goes about it by allowing insurance companies to be deemed to have realised all their assets at the date of this year's Budget, the gain then being computed as though that part of the gain

which had occurred before this year's Budget was taxed at the old rates, only that part of the gain occurring after the Budget being taxed at the new rates.
That would be a considerable alleviation for insurance companies of this sort and it would meet the point of the injustice, too. I know that it is easy to look upon clause 36 as though it was purely a relief in terms of capital gains tax, and, of course, it is a relief for any individual who qualifies under the clause, but the corresponding fact is that it adds a tax burden upon insurance companies which have not realised a gain before 5th April.
I hope that the Minister of State will look with favour on this case. I may be wrong, but I believe that the cost of the concession might be about £2 million. I have here details of one insurance company which seems to be liable to lose quite a lot—perhaps £300,000—simply as a result of a reduction in capital gains tax to the individual. That cannot be the Government's intention, and I feel sure that the Minister of State will wish to try to meet the point, complex though it may be.

Mr. Denzil Davies: As the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) rightly said, this is a complex subject. He raised it in Committee, not, I believe, directly on an amendment, and by his new clause he seeks to pursue the point further.
The new clause is moved for the benefit—I use that word in no derogatory sense—of life assurance companies which have invested the premiums of the life assured in unit and investment trusts.
As the hon. Gentleman said, we have provided a certain amount of relief in what was originally clause 35 for unit and investment trusts and their investors. The rate of charge on the gains of the trust is reduced to 10 per cent., but although it follows that the matching rate of credit must also be reduced to 10 per cent., we have allowed the existing rate of 17 per cent. to continue for disposals made before 6th April 1979. This gives investors an opportunity to realise their gains to get the benefit of the old rate of credit if they wish.
We believe that that is a simple and fair way of recognising that some part of the gain made by the investor will often


have accrued during a period in which the trust was being assessed on its realised gains at the old higher rate. But there cannot be any exact matching between the amount of the gains made by the trusts, on the one hand, and their investors, on the other. An investor is given credit regardless of whether the trust has ever borne any tax on gains.
What the life offices want, and what the hon. Gentleman seeks to argue for them in his new clause, is that because life offices have paid out past policy holders, as I understand it, on the basis that the investments in unit trusts will, when disposed of, attract a certain tax liability, they should be compensated tor the fact that that liability may be greater than expected. In other words, when the investments were disposed of, they thought that they would eventually attract a certain tax liability and, unfortunately for them in this case, the tax liability has changed and may well be greater or, indeed, is likely to be greater.
That may be unfortunate for the life offices, but this is not unusual. Tax rates are changed. We are talking about an annual tax, in effect, which may be changed every year. To make this concession to the life offices would be going further than the Government would wish. We have given relief in this respect under the clause already in the Bill, and frankly, I could not recommend the House to go further on the ground that it just happens that the tax liability has changed. Businesses and individuals have to take into account in their investments the unfortunate fact that tax liabilities may change. For that reason, we could not accept the new clause.

9.15 p.m.

Mr. Peter Rees: I am a little disappointed by that reply. It is obvious that, with his usual assiduity, My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has uncovered an anomaly, not to say a hardship, which affects the life assurance industry and thus many of our fellow citizens. It is all very well for the Minister of State to wash his hands of this and say that there will be hardships arising from tax changes but it is the business of Government to consider the consequences of their actions.
In this case, there has been some injustice to the life assurance industry and those who benefit from it. However, the point is complex. My hon. Friend has put the Government on notice. Although we have not received a satisfactory answer, I think that the Government appreciate that we may have to return to this matter. The Minister has been free with promises of what he will do in the next Finance Bill. If unfortunately another Finance Bill emanates from this Government, I have no doubt that my hon. Friend will be encouraged to seek to raise the matter again.

Mr. Ridley: No doubt, in response to my hon. and learned Friend the Member for Dover and Deal (Mr. Rees), the Minister will move such an amendment from this side to the next Finance Bill. He was clearly not happy with his brief. He merely said that he accepted that life assurance companies as taxpayers had been disadvantaged and made to pay much more tax than they had expected when they entered into certain contracts It has a sort of retrospective effect. It is right, as the right hon. Gentleman said, that if tax rates go up, business has to adjust to that in the future, but if tax rates go up affecting contracts taken out up to 10 or 15 years ago, that is not such a good thing.
I hope that the Minister will give the matter further thought. He has not given an acceptable answer. I dare say that he will be pursued by the life offices themselves for the unforthcoming and unhelpful nature of that answer. However, in the light of what my hon. and learned Friend said, I beg to ask leave to withdraw the motion.

Motion, and clause, by leave, withdrawn.

New Clause No. 29

TAX AND SHORT TERM SOCIAL SECURITY BENEFITS

'In Chapter II of Part I of the Taxes Act the following is inserted after section 27:—

"27A.—(1) Subject to subsection (2) below, the relief to which a person would be entitled under the preceding sections of this.Act shall be reduced by one fifty-second for each week of the year of assessment in respect of which


he has received a payment by way of unemployment benefit, sickness benefit or supplementary benefit.

(2) Subsection (1) above shall not have effect so as to reduce the claimant's relief below that to which he would have been entitled if the Finance Act 1978 apart from section (tax and short term social security benefits) had not been passed.".'—[Mr. Ridley.]

Brought up, and read the First time.

Mr. Ridley: I beg to move, That the clause be read a Second time.
This new clause relates to treatment of short-term benefits for tax purposes. I think that its form owes its inspiration to the hon. Member for Islington, South and Finsbury (Mr. Cunningham) who last year, in our Finance Bill debates, pursued this point with skill and effectiveness. We had a good debate on that occasion, but my intention now is to allow a discussion on the subject of how to treat these benefits.
It is becoming generally accepted that short-term benefits should be taxed. Perhaps I could first consider the possible methods. It is of course possible to pay them net of tax or to ask at the end of the year for a computation of the total income of those who have been on short-term benefit, which would in due course give rise to such charge to tax as it did.
However, the hon. Member for Islington, South, whose ideas the clause seeks to enact again, suggested that the personal allowance should, as it were, be whittled away by one-fifty-second for each week that a short-term benefit had been drawn. If a short-term benefit was drawn for a whole year there would be no personal allowance left. That has the great advantage of being easy to administer and much the most simple method from the point of view of ensuring that the tax is obtained. I will not go into the relative methods of doing this. That is, perhaps, too technical for me. I do not believe that Government advisers in high places who say that it is not possible to tax short-term benefits are right.
The method suggested in this new clause is certainly practical, although there may be better methods for all I know. I am attracted to this method because it must mean that the value of the personal allowance on the whole, not in all cases, is fairly close to the annual value of a short-term benefit. It depends upon which short-term benefit is in ques-

tion, the number of children's allowances, and many other factors. As a piece of rough justice it seems pretty close to the right method.
I make it clear that in seeking to tax short-term benefits one would not tax anyone who was simply in receipt of short-term benefits for any one year. Broadly speaking, there are two groups of people who receive such benefits and who should be subject to tax on them. First, there are those who draw short-term benefits for a short portion of the year and then return, perhaps, to a high level of income. Secondly, there are those who have considerable income from, say, pensions or investments or other sources and who are able to draw short-term benefits free of tax. There are many over the age of 60 who have retired but who treat it as part of their normal income to have unemployment benefit in addition to their pension. They believe that they are entitled to that, and they may well be.
The point is that it cannot be right in those circumstances for a substantial and continuing source of income to be free of tax. This latter matter has been dealt with on a couple of occasions by successive Governments. Both attempts were unsuccessful because there are deep and contentious political issues at stake in the taxation of unemployment benefit for those who treat it as part of their retirement emoluments. Nevertheless, I believe that both the categories I have mentioned should not be allowed to achieve those benefits tax-free. After all, a man who has £100,000 a year and is able to draw unemployment benefit is receiving, at his rate of tax, an added income supplement which would be worth, if he had to pay tax, many thousands of pounds a year.
The Financial Secretary was good enough to answer a Question of mine in which he set out the list off these benefits. There is an enormous number but only eight are wholly taxed. There are 30 different types of short-term benefits which are not taxed. It is not a very happy situation in which some benefits are partly taxed. Apparently there is a new phrase now to the effect that some State benefits are taxable in principle but not taxed. There is considerable confusion as to which benefits should be taxed and which should not be even under the present law. This is an area where we should expect


some clearing-up operation irrespective of what I seek to do now.
The main non-taxable benefits are sickness, unemployment and social security. I will not go into the list of other benefits. Many seem to be benefits paid over a considerable length of time and they could be taxable. I have never believed that we should go about our affairs in the social security sphere by making some benefits non-taxable. I must confess to my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) that I was unable to support him when he succeeded in making war widows' benefits taxable only as to half. I believe that a much more satisfactory way throughout is to pay a benefit, whoever the recipient may be, which is able to provide him with a proper standard of living—depending on the circumstances, of course—and then to subject all benefits to tax.
By this means one does not pay gratuitously large after-tax sums to people who do not need them. Equally, it is right that the tax law of the land should extend to everybody and that there should not be exceptions, because it is those exceptions which will invite people to change their particular category in order to try to get into that slot. I think that that is distorting as well.
I do not feel that this is at all the moment at which to press the new clause, but in view of the evident and obvious change of thinking in both parties, and certainly in the country as a whole, I think that we should turn our minds to thinking of taxing short-term benefits. I hope that the Financial Secretary will be able to respond with some constructive ideas and some of those pledges from him, to which we are getting so accustomed, that he really is making progress in this direction.

Mr. Powell: I do not think that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) need apologise—indeed, he did not—for bringing before the House in the form of this amendment a subject which in one form or another has been agitated for at least the last 10 years, and which I believe will not rest until it is properly resolved.
Income tax is a tax which is essentially levied on an annual basis, and yet for

almost the last 40 years an important part of the mechanism of the collecting of that tax has been upon a weekly basis. This intersection between the basis of collection of much of the tax, and the underlying principle of assessment of income for the purposes of a tax, leads to the unjustifiable inequity to which this amendment draws attention from one side.
The present position is that two taxpayers, otherwise in identical circumstances, and receiving the same income in the course of a year, may pay substantially different tax because, in the case of one of those taxpayers, the income was partly made up of various forms of benefit. That inequity is, I think, in principle no longer seriously challenged. Indeed, in the Committee stage of the Bill the Minister, answering for the Treasury, quite candidly asserted that it was now only practicability which stood between the House and the removal of that inequity.
It is no longer argued, as it was perhaps 20 or 30 years ago, that there was something special about these forms of income by way of benefit which justified and, indeed, required their being omitted from the computation of annual income. That point of view is no longer urged, and so we are face to face with the radical inequity of two identical annual incomes of taxpayers in identical circumstances differently dealt with.
It cannot be brushed aside on the ground that we are dealing, in the case of persons whose annual income is partly made up of benefits, with taxpayers whose income has fluctuated in the course of the year. These are not the only taxpayers whose incomes fluctuate in the course of the year, and it is of little use for a taxpayer in other circumstances to represent to the Inland Revenue, at the conclusion of a tax year, that admittedly that is his total income, but he did not receive it uniformly over the 12 months and, therefore, he ought not to be treated like another taxpayer whose total income is the same.
9.30 p.m.
Quite frankly, we are now facing one barrier only between ourselves and the removal of this inequity, and that is the alleged impracticability. Fundamentally, as I said at the beginning, the impracticability derives from the weekly, or


hebdomadal, form of collection of part of the income tax. This is an argument which is becoming less formidable as the years go by. Indeed, I thought I detected —for it is the tone as well as the words of Treasury Ministers which is informative—rather less confidence and conviction in the tone of the Minister of State when he was referring to this matter in Committee. It is becoming increasingly difficult to believe that when huge and complicated masses of statistical information can be handled by computer, there is something special about the statistics of weekly receipts adding up to annual income which is impregnable to attack by computer.
The whole system of the social security is now widely computerised and it is time that the Inland Revenue again started upon the exercise of investigating the practicability of restoring equity by bringing into tax sums which everyone agrees ought to be, and inherently are, taxable, namely, the benefits which form part of the annual income of a taxpayer.
As the hon. Member for Cirencester and Tewkesbury said, this is probably not a new clause to be pressed in its present form. Indeed, it may well not be in this way at all that this problem is to be approached and solved. But what ought to be forthcoming from the Government —I can tell the Financial Secretary that if it is not forthcoming this year, the year is not far ahead when it will be forthcoming., so he might step forward to pluck the fresh laurels—is an undertaking that a completely radical review of the practicability and methods which would enable these benefits to be brought into taxation will be initiated and the results will be brought forward by the Government before the next annual Finance Bill.

Mr. Ralph Howell: I should like to support my hon. Friend's new clause. A mistake has been made in this area for a very long time. It dates from 1949 at the time of the Attlee Government. Then it was a mistake of no consequence, because at that stage the tax thresholds were well above the national average wage and so no problem was caused. But year by year, under all Governments, we have lowered the tax thresholds until instead of their being 100 per cent. of the national average wage they have now fallen to about 45

per cent. It is an extremely serious matter with which we are dealing.
It is costing the regular workers of this country, the people who work year in and year out, probably more than £500 million a year because of this silly mistake, which has been known in this House for the last eight or nine years. Yet no Government seem to have the courage to put it right.
I am not enamoured by the new clause. It is messy. It is the only way in which we can bring the principle before the House and discuss it. However, I commend new clause no. 36 to the Financial Secretary, which he could introduce. It would make a clean sweep of the problem. It would mean that any amount paid out by the Government would be registered on the P45 form, just as all other income for employed persons is registered.
I can understand why Treasury officials will not listen to my suggestion. It may be that I am a little cynical, but I believe that one reason is that it would put out of work a number of people who calculate all these tax rebates. However, it is my hope that we might rise above that.
I want to draw attention to how serious this matter is. In the most recent figures that I have seen, it is proved that if a man with a wife and two children is in receipt of tax rebates, he has to earn more than £75 a week to equal the spending power of a person who is unemployed. If he has four children, he has to have a wage of more than £95 a week to equal the income of the man who is unemployed or sick whilst he is in receipt of tax refunds—and we must not forget that the tax refunds go on until all the tax previously paid has been refunded. That is extremely attractive to a great many people—[Interruption.] I wish that the Financial Secretary would listen to this argument. It would be a feather in his cap if he had the good sense to take on board new clause no. 36. It would help him no end. Regular workers are getting utterly sick of the existing position.
I want to draw attention to another matter which is even worse. It concerns the position of pensioners. Pensions are taxable. Unemployment benefit, sickness benefit and supplementary benefit are not taxable. I have drawn the attention of the Chancellor of the Exchequer to a case which came to my notice the other day involving girls from EEC countries


who were living in a YWCA hostel in Bristol and being paid £21 a week in supplementary benefit—more than a single pensioner receives. The difference between the two sums is that the £21 is not taxable whereas the pension is taxable. It is difficult to think of anything more absurd than the way in which we operate the system at present.
I shall not waste any more time talking to the Financial Secretary. I know that I shall not get much sense out of him. However, I want to direct a few remarks to my own Front Bench and to tell them that they will be making a ghastly mistake if they go in for tax credits in the form suggested in 1972. If that happens, unemployment benefit and sickness benefit will be made taxable—although we trust that they will not be taxed because it is to be hoped that the tax thresholds will be above their levels—but supplementary benefit will still remain untaxable. This will lead to a serious discrepancy between short-term unemployment and long-term unemployment. Once a person gets into the long-term bracket and begins to receive social security, he will be in a more favourable position than before. We shall make a silly mistake if we only half tackle the problem. It could be corrected in its entirely merely by adopting the form of words that appears in the amendment in my name—

Mr. Speaker: Order. I was very kind to the hon. Member, but his amendment was not selected. In fact it was out of order.

Mr. Howell: Yes, I realise that. I finish by giving my fullest support to the slightly messy new clause of my hon. Friends. I wish it well and simply say that there is a better way of doing it.

Mr. Nick Budgen: The right hon. Member for Down, South (Mr. Powell) said that it is only a matter of practicability which stands between reform of this anomaly and the present situation. Is it as simple as that? So many people are in receipt of short-term benefits in one form or another. Surely if everyone was taxed on the receipt of any short-term benefit it would not be a mere question of inconvenience for the Inland Revenue, it would

be a question of employing very many more people.
No doubt the figures that the Financial Secretary has extracted from the Inland Revenue and the Treasury will be exaggerated. There is no doubt that he has been given a particular range of figures on the cost and the number of people required to tax the benefits. There is no doubt whatever that the Financial Secretary will select the figures at the top of that range. It is plain that there will be a cost, and nobody in this House can say precisely what it will be.
The real answer is that if we could ever get back to sound money, if we were able to stop increasing the short-term benefits year in year out and stop indexing them, many of the problems would go away. As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said, when these benefits were first introduced in the period immediately after the war, the gap between the earnings of a man with five children and on a low wage and the money paid to a man who was temporarily unemployed also with five children was nothing like as small as it is now. It is a combination of the year in year out wage control and persistent indexing of short-term benefits that has made the gap smaller.
If we were able to deal with the problem of inflation, and then in happier times were able to stop indexing these benefits, it could well be that the problem of practicability would go away and we would not have to employ such a large number of extra civil servants in the Inland Revenue to deal with this grave injustice and anomaly.

9.45 p.m.

Mr. George Cunningham: I apologise for intervening in this debate as I was not present at the beginning of it, but it is a familiar subject. I have no intention of repeating the speeches that I made in Standing Committee last year on this matter. I hold to the view that I held then—that in principle short-term benefits should be taxed, and that the only objection is one of administrative difficulty.
Since moving a new clause last year in Standing Committee which was substantially or completely identical with this clause, I was able with the blessing of


the Financial Secretary to have discussions with Inland Revenue officials to clarify my mind about the exact nature of those administrative difficulties. I was persuaded that the administrative difficulties were a little greater than I appreciated last year in Standing Committee, but I was not persuaded that they were insuperable.
Basically, the exercise is as follows. With the involvement of—I have no doubt this was an exaggeration—13,000 civil servants at a financial cost of £50 million, £500 million could be collected. The Inland Revenue may regard that as a bad bargain because that ratio is less favourable than the ratio between administrative cost and product which applies to revenue collection generally. But I do not believe that that ratio of one to ten is less favourable than any other marginal element in revenue collection. I believe that for an outlay of one an income of ten is a good bargain, especially if at a time of high unemployment one gets 13,000 paid jobs into the bargain.
The administrative difficulty arises basically for the reason, as I understand it, that the social security offices would have to inform the tax offices of what they had paid out, or in my arrangement simply that they had paid out to individual recipients for a certain number of weeks. The Government say that the problem involved in one Government Department or network, namely the social security offices, finding out which local office in the other Government network, the tax office, is applicable to any particular member of the public is well nigh insuperable. It cannot go on in that way. We must have some system by which, on the production of a piece of paper, one can find out which tax office is handling which member of the public's tax affairs. I understand that this is already done in Scotland because there is one central register for tax matters there. But it is not done in England, and I believe it must be done.
Already national insurance numbers are used to some extent in the registration of tax papers, and, even without the fundamental change in the administration of the tax system which many people would like, it surely must be possible by the use of national insurance numbers to find out quickly and without great cost which

tax office is handling which member of the public's affairs.
The Government say that there will be no incentive for the applicant for social security benefits to provide the information which would allow that office to find out which office his tax office was. In my arrangement there would be one big incentive: he would not obtain any money until he did give than information. I do not see anything hard about that arrangement. The applicant is applying for central Government funds. All one is saying to that person is that, before the money is paid out, the Government want to know which is his tax office. Until he supplies that information, one does not pay out the short-term benefit.
We are not talking about peanuts. We are talking of £500 million. Think of all the good purposes, either by way of extra expenditure or abatement of other taxation, for which one could use that money.
A way must be found. If we defer from year to year the taxation of short-term benefits in the hope that some day there will be a negative income tax system, we may defer it for far longer than is necessary. If it means the outlay of £50 million to gain £500 million, which can then be distributed more in accordance with needs and deserts than the present system, that would be a desirable reform.
I hope that in the light of the resumption of the discussion that took place in Standing Committee last year the Government will re-examine this matter and conclude that the administrative difficulties are not as great as were perceived and that in so far as they exist things can be done which remove or at least reduce those administrative difficulties. I hope that some indication to that effect can he given by the Financial Secretary and that he will not simply say that for the foreseeable future we cannot touch this because the administrative difficulties are too unbearable to contemplate.

Sir G. Howe: This is clearly an important point and its development in debates in the House owes a great deal to the assiduity of the hon. Member for Islington, South and Finsbury (Mr. Cunningham) and my hon. Friend the Member for Norfolk, North (Mr. Howell), both of whom have pursued the topic with relentless energy—intellectual and inquiring—and have made it a topic which cannot


and should not be ignored and, interestingly, one which apparently commands universal support in the House.
I am sure that my hon. Friend the Member for Norfolk, North will forgive me if I do not deal at length with the important point that he made about tax credits and the tax credit system. Since the scheme was originally proposed, time has moved on and there have been a number of developments. For example, child benefits have been implemented as part of such a scheme.
We are told that the computers that will be a necessary part of a tax credit scheme are not likely to be in service until the mid-1980s. One always takes such estimates with a pinch of salt, but waiting for computers for the tax credit system is no reason for not addressing ourselves to this problem. Having to wait for computerised tax credits gives us all the more reason for addressing ourselves to this problem quickly. The point that my hon. Friend the Member for Norfolk, North made about a pattern of untaxed supplementary benefits running alongside a tax credit scheme when it arrives is also an important problem that must be taken into account.
However, the issue is more remarkable and fundamental than that. How often do Treasury Ministers sit on the Front Bench, backed by their advisers, and witness a House unanimously crying for a tax to be imposed which would yield £400 million or £500 million? The Financial Secretary has become so inured to the experience on this matter that he may be punch drunk, but it is remarkable that Parliament has plainly come to the view that here is a pattern of income which should be taxed, in equity, efficiently and in every other way. Moreover, it was the original intention of the architects of the system in 1948–49. The system started on the basis that these benefits were subject to tax and they were being taxed. The reason that that did not continue was not a sense of revulsion among politicians at the time who thought that they had done the wrong thing. It was an administrative reason, which may have been intelligible at that time when PAYE was being run in but which has become less tolerable as time has gone by.
There is a plain element of inequity. A person drawing £50 a week in one form of income pays tax on it and another person drawing the same amount in another form of benefit does not pay tax. That is the simplest illustration. It was much more elaborately demonstrated by the hon. Member for Islington, South and Finsbury who has pointed to the example of a man who can go out of work for the last six months of a year and remain out of work for the first six months of the next year and collect a substantial tax benefit. That is unjust and is increasingly widely seen as unjust.
As the right hon. Member for Down, South (Mr. Powell) said, it arises from the disjointed nature of a tax system which is based on annual income and a benefits system which is based on weekly income.

Mr. George Cunningham: The most dramatic illustration of this oddity is the case of a printer in the newspaper industry who works three nights a week for an income which is enormous compared with that received by most people in the country—so much so that it places him well above the higher tax thresholds —and who, in addition, through decisions of the independent insurance officers, is allowed to register as unemployed for the remaining days of the week, unlike most other workers, and therefore gets tax-free unemployment pay for those remaining days. He escapes not only 33 per cent. tax, but, in his case, probably 60 per cent. tax.

Sir G. Howe: That is the most dramatic illustration of the many produced by the hon. Gentleman. The reality is that there is now no one on either side of the House, on any wing of either party, who is prepared to defend the existing system. We come back to the central point made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and the right hon. Member for Down, South—that this is an administrative problem. But it is not a problem of administration which the House will indefinitely tolerate remaining unsolved.
The Conservative Government attempted to produce an answer, but we found it difficult. The Financial Secretary may snort at that, but we have gone beyond the point of snorting or chuckling about


this matter. No doubt he has the same unconvincing brief as his predecessors. We have gone beyond the point of the wringing of hands and saying that it cannot be done.
The method suggested by the hon. Member for Islington, South and Finsbury commands a great deal of respect. It appears to have greater simplicity than most others that have been offered, and it attacks the fundamentals by removing the week-by-week benefit which will accrue from the allowance when there is no taxable income coming in. If that does not work, surely it is worth looking at the alternatives again.
I understand that the Department of Health and Social Security's computer dealing with unemployment benefit is meant to be coming into service this year. If that is so, surely it is legitimate, in respect of unemployment benefit at least, to look again at the suggestion made many times of treating the DHSS as the employer for tax in respect of unemployment benefit. When the employee shifts from employment to unemployment benefit status, why should not the Department's computer embrace, as it were, the standard PAYE procedure which would have to be applied in relation to him if he had moved from, say, Unilever to ICI, from one tax-collecting employer to another?

Mr. Ralph Howell: All that needs to be done is that an emergency PAYE card be opened up for anyone sick or unemployed, and the amounts paid entered on to that emergency card as if he had changed jobs. It could be that simple.

Sir. G. Howe: My hon. Friend is representing the same point in a different way. The essential point is that on transfer from paid employment to the DHSS payroll, as it were, the man becomes treated for PAYE purposes. It is an alternative approach to that suggested by the hon. Member for Islington, South and Finsbury.
I understand that the computerisation of the sickness benefit system is more distant, and there is also the problem that in many cases the worker is effectively involved with two employers simultaneously. If he remains on the payroll of his original employer when he goes sick he draws sick pay in whole or in part

from that employer and gets sickness benefit from the DHSS, so there are two, as it were, employers involved in paying him.
But I understand that arrangements are made, in that kind of situation, specially for those employed in the Civil Service which may point a way through on a wider basis. The normal pattern if one goes sick is that one claims the benefit from the DHSS and then receives one's pay, if one continues to be entitled to pay less the benefit, so that one's pay is made up in that way. Within the Civil Service, I understand, the person who goes sick continues to receive his full pay, and no benefit is claimed by him or on his behalf from the DHSS, but, because part of his income has become benefit which is not taxable, the tax taken from his total income is reduced to reflect the fact that he is getting benefit rather than wages. No doubt the paying department is reimbursed by the DHSS across the accounts. A complicated series of bookkeeping transactions takes place. That has the effect of raising the net take-home pay of the man when he is sick because part of his pay is no longer taxed. Apart from that, there is an inter-departmental book-keeping transaction.
10 p.m.
Why should we not apply that system, but at the same time apply the principle that the sick pay will itself be taxable? On that basis all that we would need to do would be to take out the rather curious step of reducing the PAYE payable on the income that the man is receiving while he is sick. What happens is that while he is sick his employing department continues to pay him full pay less tax in the ordinary way. There is no need for him to claim benefit because it is all subsumed in the system. There is no need for his tax liability to be reduced, because he is continuing to receive taxable income. There may or may not be a reimbursement between the DHSS and the CSD.
For those employed in the great chunk of the public service that are concerned with these transactions, once it is said that a man's sick benefit part of his remuneration in that period is taxable, there is virtually no change in the existing relationship. We have thus solved the problem in that sector. If it is possible


to do that in that sector, surely it is possible to arrive at the same sort of arrangement with other large public sector employers, such as local government and nationalised industries, and many other large private sector employers, all of whom deal with their payroll on a computerised basis. We are achieving an extraction from the total pay that an employee receives through his employer when he goes sick to represent the continuing liability to income tax. It is a mechanical method that would seem to achieve that representation and reduce the scale of the rest of the problem to much more manageable proportions.
It would not seem impossible to devise, or at least consider, that system as yet another alternative. As the right hon. Member for Down, South said, it is scarcely credible that at this stage of sophistication of the computer it remains impossible to tackle the problem in the way that is suggested. I know that our experience with the Vehicle and Driver Licensing Centre at Swansea tends to make us less than exhilarated with new computer equipment, but that was a particularly unhappy experiment using equipment that was outdated when the operation started.
The Inland Revenue service in the United States, for example, is far more advanced with computerisation. It is moving into the second generation of computerisation. Many large industries in Britain and elsewhere are very far advanced in the computerised handling of the sort of data with which we are concerned. We are not dealing with complex data. It is difficult to believe that the problem remains insoluble.
The House cannot continue to be put off. It is a matter that requires the strongest possible new application of imagination and will within the administrative departments. It is astonishing to be told that tax revenue to the tune of half a billion pounds—as the hon. Member for Islington, South and Finsbury says, it could be used for the reduction of taxation or the dispersal of benefits, although we would argue about that —remains ungetatable in defiance of all the principles of equity and the original proposals set out in 1948 merely because of administrative reasons.
I hope that the Financial Secretary will give us the assurance that such authority is being put behind the tax collection system. It will be the task of some Government, and the sooner the better, to give the system that authority, that will and that imagination. The House demands it.

Mr. Robert Sheldon: The right hon. and learned Member for Surrey, East (Sir G. Howe) said that it was rare for the House of Commons as a body to call for tax to be imposed. That is true. I would point out that there have been a fair number of Tory Administrations since this problem first came to light. The failure of all Governments to come up with a method of implementing the will of the House and of the Government owes much to the problems of administration. I shall need to deal with that matter and with the general principle enunciated by the right hon. Member for Down, South (Mr. Powell), who compared two taxpayers in like situations and pointed out how one had certain advantages that were denied to the other. We have accepted the necessity in principle for taxing short-term benefits and we are concerned only with the problem of implementing this taxation.
Before going into these problems, I should like to deal with the point made by the hon. Member for Wolverhampton, South-West (Mr. Budgen) who put forward the argument—and argument that might be attractive to a number of hon. Members—that indexing was the solution.

Mr. Budgen: No. I said the opposite.

Mr. Sheldon: I misunderstood the hon. Gentleman. I understood the hon. Gentleman to argue—perhaps he will hear me and then correct me if I have his point wrong—that the failure to index the thresholds meant that the problems became greater than they otherwise would have been. Does the hon. Gentleman wish to intervene?

Mr. Budgen: I was referring not to the thresholds, but to the indexing of the benefits, and simply remarking that if we ever got back to stable money it would be unnecessary to index the benefits.

Mr. Sheldon: I think that there is common ground on this matter. The indexing of benefits is obviously less


necessary when the rate of inflation is lower.
I think that we owe a great deal to my hon. Friend the Member for Islington South and Finsbury (Mr. Cunningham) who went into this matter with his usual extreme thoroughness. He had a number of conversations with me in the Treasury and elsewhere as well as with officials in an attempt to find a solution to the administrative difficulties. He made valuable contributions in debates in this House as a result of his examination of the problem. As a result of the extensive research that he undertook, he found, as the Treasury and I found, particular problems concerning the number of civil servants who would be required to operate a scheme and the methods by which the paper could be transferred from within the various parts of the Goverment machine to the relevant Departments.
I shall come on to the question of administration later. The main difference between my hon. Friend and myself is on the f50-million-cost-for-£500-million revenue argument. I do not know whether these figures have a close relationship to reality. I know that the estimates that we now have are a little more refined than those which I gave my hon. Friend when he was inquiring into this matter. We would need about 10,000 civil servants—fewer than my hon. Friend mentioned. He thought that the figure was inflated. If it was inflated by that amount, perhaps he was right. He considered that a good bargain.
With the problem of so many people moving from manufacturing into Government service generally, I view this matter with more trepidation than my hon. Friend. I see problems not only in the increase in the numbers of civil servants, but in the bureaucracy, which would be unjustifiable. I should be prepared to look at that matter if there were not other disadvantages, to which I shall come.
My hon. Friend mentioned that in Scotland there is the Centre 1 computer complex which makes possible certain operations which are not possible elsewhere. The taxation of short-term benefits is right in principle. I affirm that its administrative cost is high. The hon. Member for Cirencester and Tewkesbury

(Mr. Ridley) mentioned the amounts of money that could be saved by taxing short-term benefits.
The right hon. and learned Member for Surrey, East (Sir G. Howe) dealt with the implications for civil servants. But the important distinction is that they retain the same jobs. There is an enormous variety of job changes and changing of addresses involving the different offices of the Departments of Employment, Social Security and the Inland Revenue. That gives one some indication of the enormous paper chase that is involved in any scheme that one can devise. Such a scheme would involve the social security office notifying the tax office of the number of weeks that each claimant received benefits. In general the claimants would be unlikely to assist because that would mean that they would have to pay tax.
Even if people were supposed to have a piece of paper before they received benefit, many people would not have that piece of paper. Even if they did have such a piece of paper, one would still be faced with the problem of the urgency with which they required the money to which they were entitled. Such matters are not sorted out quickly or easily. Most of us have had telephone calls at awkward times at the weekend as people try to make claims at short notice. If in addition to that one had to deal with the income tax office, a place that might be remote, before one could get one's money, additional problems would be caused.

Mr. Budgen: Does the Minister agree that the piece of paper to which he referred could be some form of identity card which could be used in many other transactions?

Mr. Sheldon: There are all sorts of ways in which bureaucracy could be more efficiently undertaken. Perhaps the House will in the future agree that there should be pieces of paper upon which many personal particulars appear. So far the House has not taken that view. I am not sure that it would approve of such a scheme if it were put to the House.

Mr. George Cunningham: Surely the piece of paper which most people have is the coding notice which has the address of the relevant tax office stamped upon it. If people were told "Produce that or you do not get your money" it would


be found quickly. I put that starkly, and in fact one would not be as inhuman as that. One would have to stress more the importance of keeping the coding notice and of making this use of it. Surely that is a possibility. It is absurd that a member of the public should not be able to identify quickly from a document the tax office which is handling his affairs. He ought to know that for other reasons.

Mr. Sheldon: I agree that in many cases —perhaps in more than my hon. Friend suggests—such pieces of paper would be available. But in certain cases such a piece of paper would not show the amount of tax that was to be charged because it would not contain all the particulars.
The problem is—how do we withdraw the deduction equal to a fraction one divided by fifty-two? The easiest way is when the person returns to work. That would be when the deduction would be made, with the effect of high deductions on return to work. As the hon. Member for Cornwall, North (Mr. Pardoe) said it is not so attractive to return to work. But there are other problems. At a time when a person might be looking towards a resumption of his earnings, that will be denied to him.
10.15 p.m.
The major problem is that we need a new system. We have needed it for about 10 years. The Inland Revenue was well on the way to proceeding in this direction when the last Conservative Government started down the long road to tax credits. I note what the hon. Member for Norfolk, North said in that respect. Tax credits was the wrong road because it stopped the computerisation scheme. It was bad in itself for reasons that we amply demonstrated at the time, and it prevented the fundamental changes that we are now in the process of putting forward from being implemented. It created the extensive delay that we are now having to put right.

Mr. Ralph Howell: Why is it impossible for an emergency P45 to be issued with the amounts paid to the individual entered on it? The individual could take that back to his employer or to a new employer after sickness or unemployment. The Minister's arguments are invalid. I am sure that he accepts that. He has been brainwashed, as were the last Government, by Treasury officials into believing that it would take more people to

operate this scheme. It would take considerably fewer.

Mr. Sheldon: I do not believe that people would come forward with these forms in the numbers envisaged by the hon. Member. There will be a large number of cases in which the forms will not be in the right place at the right time. Even if they were, there would still be a paper chase between the various departments, which could be at any location, and the tax office. There would still need to be a deduction and notification of that, and that would have to be done at sufficient speed to prevent any undue delay in the payment of benefits. That is the major problem to which the hon. Gentleman has not addressed himself. The point is that these people, needing money urgently, could not accept that kind of delay, which would arise even if the scheme were as watertight as the hon. Gentleman suggests.

Mr. Budgen: Will the Minister say whether any calculations have been made as to the amount of benefit paid out in response to fraudulent applications and which would be saved if everyone had to have the same piece of paper, as the right hon. Gentleman described it? I will not argue about the various types of pieces of paper. Surely that would be a major safeguard against fraudulent applications.

Mr. Sheldon: Obviously I have no such assessment here. I am not even sure that the scheme advanced by the hon. Gentleman would assist. There may be aspects of this matter which we do not have time to examine which might make fraudulent claims more likely. I do not know. Parliament is at one in wanting to continue the operation that the previous Government stopped. It is time that that operation was resumed. The Government last year undertook a full study of the requirements so that the design parameters for dealing with the problem could be set.
I accept the comparison that the right hon. and learned Member for Surrey, East makes between the computerisation of our taxation affairs and the position in the United States. That is certainly the road along which we wish to go. There is the allied question of self-assessment about which I have made


announcements previously, but computerisation stands apart.
A number of suggestions have been made in the debate. I shall be very happy to examine a number of them to see what useful information can be extracted in order to bring about the better method of operation even by the setting of certain guidelines. However, I am unable to accept the clause.

Sir G. Howe: The Financial Secretary has talked about the impossibility of the scheme embodied in the new clause and has rehearsed the familiar reasons for its not being acceptable. He closed by saying that he would contemplate the design parameters, whatever that may mean, in order to resurrect whatever may have been going on before 1970 in the context of computerisation, which is certainly not likely to come before 1985.
Is that what the right hon. Gentleman regards as the full, sufficient and necessary answer to the debate tonight, as in years past—that we have to wait for computerisation to be carried through in the context of the new design parameters of which he spoke? Does he have no other solution to offer? If we are left as we were last year, waiting for the ful-

filment of computerisation, it is a wholly unsatisfactory outcome.

Mr. Sheldon: I am sorry that the right hon. and learned Gentleman does not seem to have taken part in the debates last year when we explored the foothills, and perhaps even more as a result of the intervention of my hon. Friend the Member for Islington, South and Finsbury. There are these problems of the means of communicating a vast amount of information for large numbers of people, as well as the 10,000 civil servants whom we believe to be necessary.
If the right hon. and learned Gentleman questions that assessment, I take it that he is studying the matter, and I shall be pleased if he can find ways of reducing the number of civil servants so that the ratio is not, as my hon. Friend the Member for Islington, South and Finsbury suggests, £50 million to gain £500 million but is a better ratio. Would the right hon. and learned Gentleman go ahead on that sort of ratio? For my part, I would not. I would wish to have something far better. If the right hon. and learned Gentleman feels that that is a satisfactory ratio on which to commence operations, let him say so, so that the House will see where he stands.

Question put and negatived.

New Clause No. 30

DEATH IN PUBLIC SERVICE

'In Schedule 7 to the Finance Act 1975 there shall be added:

"1(a) (1) Section 22 of this Act shall not apply in relation to the death of a person in whose case it can be shown—

(a) that he died from a wound inflicted, accident occurring or disease contracted at a time when the conditions specified in sub-paragraph (2) below were satisfied or
(b) that he died from a wound inflicted or disease contracted at some previous time, the death being due to or hastened by the aggravation of the wound or disease during a period when those conditions were satisfied.

(2) The condition referred to in sub-paragraph (1) above are that the deceased was or was the spouse of the holder of an office under the Crown, or a person in the service of the Crown and either—

(a) was performing the duties of that office or employment, or
(b) but for the holding of that office or employment by the deceased or his spouse, it would be reasonable to conclude that the death would not have occurred.

(3) This section shall be deemed always to have had effect".'.—[Mr. Peter Rees.]

Brought up, and read the First time.

Mr. Peter Rees: I beg to move, That the clause be read a Second time.
It is a long and well understood tradition that the estates of members of the armed forces and related services who are killed on active service or in comparable conditions should be exempt from estate duty and, subsequently, from capital transfer tax. For estate duty the provisions are to be found in the Finance Act 1952, and in respect of capital transfer tax they are to be found in Schedule 7 to the Finance Act 1975.
There is relief from capital transfer tax for the estates of those members of the armed forces and a variety of related services, such as the Queen Alexandra's nurses and people in that sort of category, who die from wounds inflicted, accident occurring or disease contracted on active service or other service of a warlike nature.
Perhaps we have a sharper perception now of this problem since the tragic assassination of Sir Richard Sharples, a much respected and much liked former

Member of the House, when he was Governor of Bermuda, and the more recent assassination by explosives of Mr. Christopher Ewart-Biggs, who, after a distinguished career in the services, was our ambassador in Dublin. Perhaps the threat comes a little bit nearer home now, as one contemplates the tragic death of Signor Aldo Moro, a distinguished Italian politician.
The theme underlying the new clause is that, since the area of risk has now been extended, so the relief should be extended. The new clause would extend the relief from capital transfer tax in the case of a person who dies while in the public service from wounds inflicted, accident occurring or disease contracted—it will be noted that these are precisely the terms used in the earlier estate duty and capital transfer tax legislation—while he is the holder of an office under the Crown or, if a spouse, while he or she is married to a person who is the holder of an office under the Crown, if the death can reasonably be attributed to such service.
No doubt it will be urged that this is an extension of the principle that we have rightly accepted for so long, that it brings in a wider class of person in different circumstances. But these are people who are now shown, on sad and recent experience, to be at risk. They are people who —or this is true of their husbands or wives —are honourably serving this country, perhaps overseas or sadly in Ulster and who may be at risk by reason of their service. It is wrong that their families should suffer when they are bereaved in this way.
One hopes that the numbers involved will not be large. If they were, that would be a sad commentary on the state of this country and the service of its representatives. It cannot be objected that this will open the door to avoidance of any kind. No one is likely to put himself or his family at risk to avoid capital transfer tax. Most people in the service of the Crown have a srong sense of public duty, but we say that no one should be looking over his shoulder at the consequences to his family of his service in a position of possible danger while a servant of the Crown.
There are no figures that we can bandy about, but the cost cannot be great. I cannot believe that the Government's public expenditure plans will be seriously


affected. I hope that both sides will believe, as I do, that if any revenue has to be forgone, it will be forgone in a good cause. I cannot believe that the Government will want to preserve the inviolability of the tax system at the expense of the families of those in public service who are exposed to risk. I hope that the Government will favour the new clause and that if they do not, it will command the support of the whole House.

Mr. Powell: The hon. and learned Member for Dover and Deal (Mr. Rees) referred specifically, though by no means exclusively, to cases such as those of a former governor and a former ambassador. But it is impossible for an hon. Member representing a constituency in Northern Ireland to read the new clause without applying it to persons in Northern Ireland in much humbler situations. That is why the clause and the intention behind it certainly have the support of my hon. Friends and myself.
I should like to refer first to one new element which the new clause will introduce into the code which at present appears in schedule 7—I think that the reference on the Amendment Paper to schedule 1 in the first line of the new clause is a misprint—of the Finance Act 1975.
If we construe subsection (2) we arrive at
the spouse of the holder of an office under the Crown or a person in the service of the Crown
of whom,
but for the holding of that office or employment by the deceased or his spouse, it would be reasonable to conclude that the death would not have occurred.
In Northern Ireland, the wives and husbands—particularly wives—of members of the security forces and of the armed forces are at personal risk. They are at sometimes equal personal risk to that of their husbands. They are at personal risk for exactly the same reasons as those which expose their husbands to the danger of mutilation and death.
10.30 p.m.
I have at the moment in my mind's eye a house in my constituency where I was taken by the wife of the tenant who is a regular member of the UDR. I was shown the bullet holes on the wall of her sitting room—one of which

had gone through a devotional picture—which had arisen from the spraying of the house with bullets while the husband was away, by someone who wished to terrorise the husband into discontinuing his service as a full-time member of the UDR.
I think also of cases where a member of the security forces has been lured into a trap or has been called to the door of his house by a combination of a telephone call and a bogus knock on the door and where the wife, being present and realising what was about to happen, has thrown herself between the assailant and her husband. It is a present fact—it is not a matter of theory—in Northern Ireland that the spouses of the members of the armed forces in the circumstances set out in Schedule 7 are at a similar kind of risk in exactly the same circumstances and for the same reasons. For that reason alone I would regard this new clause as justified and important. It is time that we recognised that the wife is in the front line just as much as the husband where the husband is in the security forces.
There is another extension made by the new clause. No doubt it will be an extension to which the right hon. Member replying will be quick to draw attention. The present code in schedule 7 of the 1975 Act refers to members of the armed forces of the Crown, those associated with them, and certain of their—I was going to say "para-military" but I should not use that word—kindred organisations, described in paragraph 1(3) of the schedule. That is clearly much more restricted than
the holder of an office under the Crown
or being
in the service of the Crown.
When the 1975 Bill was going through the House my hon. Friends and I were most anxious, although we failed in our attempt, that the Royal Ulster Constabulary and the Royal Ulster Constabulary Reserve should be included in the same manner as the armed forces of the Crown from whom, in the circumstances of Northern Ireland and in the operations in Northern Ireland, they are scarcely to be distinguished. But the matter does not stop there. No doubt the RUC would have been brought within the scope


—[Interruption.]—of the measure by the description
the service of the Crown.
I hope that that is an important conversation that is taking place on the Treasury Bench. It is certainly a loud one. I am sure that it is intended to be helpful and that I shall be grateful for the outcome of it. It is just a little difficult to make headway against the vigour with which it is being conducted. Had I been able to make headway, I would not have interrupted the conversation.
In moving the new clause the hon. and learned Member for Dover and Deal referred to what I might call civilian and exalted civilian servants of the Crown. Here again, in Northern Ireland, the realities come home to the much more humble. Again I have in mind some active and courageous servants of the Crown who are not in uniform but who are at risk because they are in the service of the Crown.
I think that I can now refer, without causing risk to anyone, to the occasion—it is now two or three months ago—when the head of the social security office in Newry in my constituency, an extremely distinguished civil servant and a man upon whose judgment I have come to rely, certainly a man who performed his duties without fear or favour, was very nearly deprived of his life and was certainly deprived of the full enjoyment of his health for the rest of his life by an attack upon him outside his office. There is not the slightest doubt whatsoever that that murderous attack was made upon him because he was a servant of the Crown performing a task which, although beneficial to all for whom it was performed, brought him into contact with the poplation as, in a sense, the representative of the Crown.
He was, if I may say so, as much the representative of the Crown as Sir Richard Sharpies or Her Britannic Majesty's late ambassador in Dublin. In those circumstances, and for that reason, he was within an ace of being murdered, and I am sure that instances could be produced where those words "within an ace of" would not need to be inserted in the sentence.
There is no doubt at all that the words in subsection (2)(b) of the new clause

but for the holding of that office or employment … by the deceased … the death would not have occurred".
were fully complied with in that and in many other cases.
It is three years since the necessity of such a code as is embodied in schedule 7 of the Finance Act 1975 was recognised by the whole House. In those three years we have, as the hon. and learned Member for Dover and Deal said, learned that the scope of this kind of risk is unhappily wider than we had feared, but the arguments are the same and the justification of the exemption is the same. I submit, therefore, that the time has come when a widening of the categories is called for in plain and simple justice and in a realistic recognition of the facts of the world in which we live.
One does not judge these matters very precisely by cost but, of course, one is not here opening up a wide area of potential extension of exemption. The actual deferment of revenue—it is probably deferment, though maybe long deferment rather than loss of revenue—which would be involved is, I feel sure, not important. But what is important is the removal of an inequity, an injustice, as between the men and their wives who suffer in exactly the same way in the same causes and in the same service. I believe that if the principle of the new clause were accepted by the House tonight, that would be something which the public would fully understand and would welcome as right and just.

Mr. William Hamilton: I hope that the House will look very carefully at the new clause before accepting it. I have listened to many debates in this House where we have sought to give exceptional preferential treatment to limited sections of the community, in tax matters or in other matters. I always wonder, when I listen to those debates, why we should go out of our way to single out people for this kind of special preferential treatment who happen to be, to use the term, in the service of the Crown.
I do not think that that phrase means very much. It does not mean very much to me. People in this country who work in any job are in the service of the nation as a whole. It matters not a hoot to me whether they are serving in Bermuda, in Washington or in a coal mine in Fife


They are all doing the job that they see fit to do in the interests of the nation.
Let us take the example of our ambassador in Washington. Let us suppose that Mr. Peter Jay is shot in the course of duty, which is not such an improbable event. Under this clause, the estate of Mr. Jay would be exempt from estate duty and capital transfer tax. If Mr. Jay unfortunately lost his life in those circumstances, why should his estate be treated differently from that of, say, a miner in my constituency who lost his life on a rescue operation? Are his wife and dependants to be treated any differently from and less preferentially than the wife and dependants of Mr. Jay? Mr. Jay has a very handsome salary and a very handsome set of expenses. Miners all over Britain and the dockyard workers who are working on nuclear submarines in Rosyth dockyard are different, apparently. Their wives and relations are to be treated less preferentially than the people concerned in this clause.
The argument then is adduced on the other side—and it is a well-known argument—that it will not cost very much. Always, when there is a weak case, it is said that it will not affect many people and that it will not cost very much. I can imagine, immediately after the granting of an exemption of this kind, having a mining accident in my constituency and a miner's widow writing to me saying "Willie, you are a Socialist Member of Parliament. How do you defend giving that kind of preferential treatment to that well-paid public servant but not to me?" On no grounds at all could I defend that.
I hope that the House will look at this clause with a very jaundiced eye. Once we start exempting people from tax of any kind, we get into all sorts of anomalies. If we draw a line, someone falls just below the line and someone gets above it.
I find this proposal particularly offensive. I am not sure whether our forces in Northern Ireland are given exemption by this or whether the colonels and brigadiers are but not the privates.

Mr. Powell: I can help the hon. Member. Any member of the armed forces of the Crown is covered by the existing code. I do not know whether he voted against it three years ago, but it is on

the statute book, and it was passed by this Government.

Mr. Hamilton: That makes the anomaly even more indefensible. I have referred to dockyard workers. I think the people working on nuclear submarines in Rosyth dockyard are just as much at risk as some of the forces about whom the right hon. Member is talking. Why should they be treated any less favourably than the Ulster soldier? There is no possible reason in equity or for any other reason why that should be so. For those reasons, I hope that the House will vote against the clause.

Mr. Graham Page: I do not see this clause as singling out people for some exceptional preferential treatment. It is a very logical and reasonable extension of principles which are recognised already in this part of the law.
It is not necessary for a taxation system to be devoid of compassion. It is not necessary to be entirely logical in taxation. After all, the money is being collected on behalf of the public. It is right that there should be fairness between one taxpayer and another but we have recognised already that those in the service of the Crown are entitled to certain exceptions. Of course, they must be in many spheres of the law, and not only in taxation.
If one is collecting money on behalf of the public, one should remember that the public has a soft heart. That is what I mean by taxation not being entirely devoid of compassion. The public would approve of compassionate treatment in this case. I do not want to go any further than to point out that this is a reasonable extension of something that is already recognised.

10.45 p.m.

Mr. Cope: I did not intend to intervene in this debate, but I have been prompted to do so by the speech of the hon. Member for Fife, Central (Mr. Hamilton). I recognise the sincerity of his views and I respect him for that. But I cannot agree with him.
For a start there was a flaw in the example he gave. He referred to the wife of a miner who might approach him in the circumstances he outlined. But capital transfer tax would not apply in that case between two spouses. However, that is


a technical difference, not a difference of principle.
Secondly, there is no difference between the treatment of the private and brigadier, or between the lowest clerk in the embassy and the ambassador if they meet their deaths in the circumstances outlined in the new clause.
I believe that there is a different degree of risk involved in relation to soldiers in the Gloucestershire Regiment, for example, who are currently in Northern Ireland, on a long tour, accompanied by their wives. Daily they are patrolling the streets in their part of Northern Ireland, and they are living in difficult conditions.
They are in the position of many of the constituents of the right hon. Member for Down, South (Mr. Powell). I recognise that my constituents are only in Northern Ireland for a relatively short time compared with his. Nevertheless, there is a different degree of risk. All the soldiers who are there—and this applies equally to the RUC and others—are there because they are volunteers, and we need volunteers if we are to keep the peace in Northern Ireland, and win through in this difficult struggle. For that reason it is in the nation's interests that we should pass the new clause.

Mr. Nelson: Is there not an additional difference between the two circumstances that have been described in the debate? In many cases the dependants of a deceased person killed in the civilian sector may be able to obtain civil damages, whereas in the case of service men in many theatres of war—perhaps not Northern Ireland—there is no ability to obtain recompense. The existing legislation takes account of that and the new clause simply builds on the recognition in that legislation.

Mr. Cope: My hon. Friend makes his point extremely well. I remember that the 1975 Finance Bill would have phased out such relief as exists for the armed forces. I had the honour of putting down an amendment which led to the relief being continued. That is an episode in my parliamentary career with which I am very pleased. I would be delighted to see it extended in the way envisaged in the new clause.

Mr. Denzil Davies: The new clause seeks to extend relief from capital transfer tax beyond the present relief which is confined to the armed services of the Crown. The right hon. Member for Down, South (Mr. Powell) mentioned Northern Ireland, and will be aware that the statutory relief for the armed services has been extended by concession in Northern Ireland to the Royal Ulster Constabulary because it is felt that its duties are inherently the same as those of the armed forces of the Crown. That is the extent of the relief. It is confined, subject to that concession, to the armed forces of the Crown.
This is an old relief and extends back beyond capital transfer tax to estate duty. The reason is that the job of the armed forces is by its nature inherently dangerous. Indeed, its very purpose is to go into danger, whereas the other activities mentioned, although there may be incidental danger, again subject to the exception of Northern Ireland, are not inherently dangerous jobs in the same way as those carried out by the soldier.
The new clause seeks to extend the relief. One can understand the reason for the clause. We all know of the case involving Sir Richard Sharples and also of the recent case involving the British ambassador to the Republic of Ireland. Representations have been made from time to time about cases of this kind. Governments have always examined them and have come to the conclusion that it is difficult in that area to extend the relief without creating considerable injustices, unfairnesses and anomalies.
The right hon. Member for Crosby (Mr. Page) said that the tax system need not be logical. Perhaps one can accept that, but a tax system needs to be fair between one citizen and another whether or not that citizen is a servant of the Crown. This is where the difficulty lies in respect of the new clause. Once one looks at it, one appreciates the difficulty of trying to set some limit on the extension of the relief. The new clause seeks to extend the relief and then seeks to set a limit on that extension. It is at the point of the limit that the anomaly, unfairness and injustice come in. The limit is a servant of the Crown or a Crown servant, which is a fairly narrow description of "employment". Only those who hold


an office under the Crown, as I understand it, would be enabled to benefit from the clause.
Yet one could face a position at present where a collection of people could be gathered in a place which might be the object of a terrorist attack. One of those persons might be, shall we say, a civil servant in a Government Department, another might be a member of a nationalised industry, and yet another a director of BP. Two of those three would not be servants of the Crown. The civil servant would be a servant of the Crown, and yet the three people might be carrying out the same function, doing the same service in exactly the same way. But because one happened to be a servant of the Crown and the other two happened not to be, the estate of one would be free from capital transfer tax and the estate of the others would not. I cannot see the logic in deciding, for example, that where a civil servant in the Department of Energy were discussing oil matters with a director of BP, if both for some reason or other were hijacked or attacked in some way, one estate should be free from capital transfer tax and the other not free from that tax.
Mention was made of Mr. Moro. Again, coming closer to this House, if there were some kind of attack on Members of this House, what logic or fairness is there that the estate of a Minister—if he has any estate—being a servant of the Crown would benefit from the clause, whereas that of any other Member of the House would not benefit? That also applies to the public. Therefore, there is no logic, fairness or justice, so far as I can see, about this clause.

Mr. Graham Page: Would not the same situation arise, as the law stands at present, if there were a member of the armed forces serving alongside a policeman and they were both blown up?

Mr. Davies: Yes, but I have tried to explain—and it is difficult to make a wholly convincing case—that the work of a member of the armed forces is inherently dangerous, but the work of a policeman, while danger is incidental to it, could not be said to be inherently dangerous. That distinction may not entirely commend itself to the House, but I believe that it is a reasonable distinction between one case and the other.
Remembering my law studies of long ago, I. understand that policemen are not servants of the Crown and therefore they would not be covered anyway by the new clause.

Mr. Budgen: Does the Minister not agree that we may have situations in the State, such as the continuing state of near rebellion in Northern Ireland, which mean that persons outside the immediate category of the armed services find that their work is inherently dangerous?

Mr. Davies: Absolutely. Section 46 of the Finance Act 1941 was used after the war in certain cases in Malaya, Kenya and Cyprus, but the extension was very limited. Generally, the distinction between the armed forces and others is reasonable. The work of firemen is extremely dangerous, especially, as the right hon. Member for Down, South pointed out, in Northern Ireland, but they would not he covered by the new clause—certainly in Great Britain—because they are not servants of the Crown.
There have been at least two hard cases, but unfortunately one cannot legislate on the basis of those hard cases because, as I have tried to demonstrate, it is practically impossible to draw the line between Crown servants and others. Once we go beyond the narrow category of the armed forces, I see no logic or justice in the new clause. It leaves out so many people who, in justice, should be included. But there lies the difficulty. For that reason, I cannot accept the new clause.

Mr. Peter Rees: We have had a short, but important debate. Before coming to the points of substance, may I draw your attention, Mr. Deputy Speaker, to the fact that there is a printing error in the new clause as it appears on the Amendment Paper? Obviously, it is designed to be an amendment to schedule 7 of the Finance Act 1975 and not to schedule 1.

Mr. Deputy Speaker: My attention has already been drawn to that error by the right hon. Member for Down, South (Mr. Powell).

Mr. Rees: Since I moved the new clause, I thought it right that I should endorse the point formally in case it should be thought that I had overlooked it. But I am grateful to you, Mr. Deputy


Speaker, for having corrected me, if that were necessary.
I am also grateful to the right hon. Member for Down, South (Mr. Powell) for having brought the debate down from the perhaps slightly high-flown level on which I launched it to instances that occur daily in the Province of Ulster. Regrettably, they do not seem to have moved the Government Front Bench. The right hon. Gentleman has given vivid instances of the utility, good sense and equity of the new clause as it applies to hundreds, if not thousands, of our fellow citizens in Ulster, even though, in opening, I was disposed to give instances affecting servants of the Crown mainly in posts abroad.
11.0 p.m.
The hon. Member for Fife, Central (Mr. Hamilton) said that he looked on the clause with a jaundiced eye. I am sorry about that, because I respect his judgment in some if not all matters. I am sorry that the clause should generate jaundice on either side of the House because it is a matter of considerable importance, and I hope that we can look at it with good sense but also with compassion, without jaundice and without rancour. I hope that no partisan note will be struck, certainly by myself, in this debate.
I reassure the hon. Gentleman that had he chosen to look back at the previous estate duty legislation and, indeed, at the current capital transfer tax legislation, which, so far as I know, he supported completely—it may well be that he recorded his dissent, but if he did I have been unable to discover it in Hansard—he would have found that there has been for many years relief from estate duty and CTT for all members of the armed forces—both for private soldiers and for general officers; rank is totally unimportant in this context.
Beyond that, the House may recall that it relates not only to members of the armed forces. I think that it is important to read the list because, since the Minister of State has pinned his case on the practical difficulties of drawing a line, I should like to demonstrate how imprecise the line is at the moment. I shall do so by reading out the categories of persons other than those in the armed forces whose estates at the moment bene-

fit from this concession, if that is how it should be regarded.
I do not wish to reflect in any way on the value of their services, which I know are incomparable, but since the Minister of State says that drawing lines is a difficult operation, I would remind the House that at the moment a member of the Queen Alexandra's Royal Naval Nursing Service, or any reserve thereof, has the benefit of the relief from CTT if she is killed on active service or on comparable activities. The list goes on to include a member of the Territorial Army Nursing Service; a member of the Women's Royal Naval Service or any reserve; a woman medical or dental practitioner serving in the Royal Navy or any naval reserve.

Mr. Pardoe: They are all armed forces.

Mr. Rees: The hon. Gentleman, with his acute and precise mind, says that they are members of the armed services. What I am attempting to demonstrate is that not every person who advances into the breach with a rifle in his hand has his estate accorded this particular relief, and it is possible to draw a line so as to embrace a woman employed in the Royal Army Medical Corps, the Royal Army Dental Corps, the Women's Auxiliary Air Force, or women employed by the medical branch or the dental branch of the Royal Air Force, with the relative rank as an officer; a member of the Voluntary Aid Detachments employed under the Admiralty Council, Army Council, Air Council, or Defence Council. The hon. Gentleman will see from that list that the line is nothing like as precise as the Minister would have us believe.

Mr. Denzil Davies: The hon. and learned Gentleman is making a bad point.

Mr. Rees: The hon. Gentleman says I am making a bad point. If he is pinning his case, as he appeared to do, on the difficulties of drawing lines, all I can say is that he was not over-oppressed in 1972 by the difficulty of drawing a line in that case.

Mr. Joel Barnett: Armed forces.

Mr. Rees: The right hon. Gentleman raises his hand and says "Armed forces", but the principle underlying the


new clause as it underlay the relief conceded in 1972 is that those who are exposed to exceptional risks by virtue of their service should be afforded exceptional reliefs.

Mr. Denzil Davies: Is the hon. and learned Gentleman saying that a civil servant, perhaps in the Treasury, is in that category, subject to exceptional risks of danger? His clause would cover that kind of person.

Mr. Rees: If it could be shown that he or his spouse were to be despatched to Ulster by virtue of his service, he would be in that category. That is the principle underlying the clause. It is that which moved us to put the clause down and to debate it tonight. If the right hon. Gentleman does not even accept the principle, a large gulf has opened between the Government Front Bench and the Opposition Benches. The Chief Secretary nods his head. It seems that he takes the view that there is a wide gulf. I am sorry that that is so. I thought that we could agree, leaving aside the hon. Member for Fife, Central, that the principle was a good one even though we might find difficulty in clothing it in statutory form.

Mr. A. P. Costain: Are not the Government saying that if someone suffers the tragedy of dying in the service of the Crown, the Crown should tax him?

Mr. Rees: When we analyse the arguments deployed by the right hon. Gentleman, it seems that he was constructing a good case for saying that we should not charge tax by reference to death. That would open up the debate perhaps unnecessarily wide for my purposes. I am sure that I should be in order if I were to take that course, but I do not know whether I should carry the whole House with me if I were to deploy that argument.
I prefer to rest the case for the clause on the narrower ground that those who are exposed to exceptional risks by virtue of their office or duties should be accorded the reliefs set out in the clause.
It could be that in the nineteenth century those in public offices were not exposed to risks, although I recall that Lord Frederick Cavendish was gunned down in Phoenix Park and that Sir Louis Cavagnari with his escort of guides was

done to death in our embassy at Kabul. However, those were different times and before the introduction of estate duty, so it is not necessary to draw comfort from those historical instances.
The examples that I have given indicate that we have moved into a different era where those in public offices are exposed to special risks. They are often singled out for the attention of terrorists. It is no complete answer to say that others regrettably will also be exposed to similar risks. It is regrettably true that in Northern Ireland there will be those who are not in public employment who will be exposed to risks. It may be true that those accompanying our ambassadors, and even our Ministers of the Crown, will be exposed to risks. If that is so, the Minister of State is constructing a good argument for extending the ambit of the clause. If he is prepared to say that he will consider the principle sympathetically to ascertain whether it may be embodied in statutory form in a more adroit and precise way, I for one shall not be discouraged.
All I want the House to recognise on this occasion is that there is an old principle at stake that needs to be applied to a new situation. We have not so far extracted even a glimmer of recognition from the Minister of State. The right hon. Gentleman has dwelt, presumably with an official brief in his hands, on the difficulties of drawing the line. If he says that he accepts the principle, that he will take away the clause to ascertain whether it may be refilled and polished and will intoduce it at the next Finance Bill, if he is to introduce another, we shall be happy. For the moment I am discouraged that those on the Government Front Bench are disposed to treat this as a frivolous exercise. The right hon. Member for Down, South found it difficult to penetrate their conversations.
I hope that Labour Members behind the Treasury team who have pondered more carefully and compassionately on this exercise will recognise that there is a point to be made. If the hon. Member for Fife, Central feels that the ambit should be extended, and if he feels that perhaps he was wrong to have supported the relief that was embodied in the 1972 Act on the ground that it was too narrowly drawn, we shall welcome his support. I hope that at the end of the day the


House will recognise that an important principle is at stake.
As we recognise the difficulties—I accept that there are practical difficulties we shall not be disposed on this occasion to press the clause to a Division. However, I think that the Minister of State owes it to the House to say that there is a principle at stake. Even if he finds difficulty in the way in which it has been embodied in the clause, I hope that he will accept that the great Department of State that he represents should consider the principle again and rather more carefully than hitherto.
Although we shall not press the clause to a Division, we must put the right hon. Gentleman on notice that if he is unulcky enough to be occupying the Government Bench and to be commending to the House another Finance Bill in the future, we shall have to revert to the principle underlying the clause and on that next occasion we shall press it with a great deal of vigour.

Question put and negatived.

New Clause No. 34

EARNINGS FROM WORK DONE ABROAD

'In Schedule 7 to the Finance Act 1977 (Earnings from work done abroad) there shall be inserted:—
6A. For the purposes of this Schedule section 184(3)(a) (duties of any office or employment under the Crown treated as performed in the United Kingdom) shall not apply to any duties performed outside the United Kingdom if in respect of the period which those duties were performed the person performing the duties was not in receipt of an allowance to which section 369 of the Taxes Act applies. In applying this paragraph any area designated under section 1(7) of the Continental Shelf Act 1964 shall be treated as part of the United Kingdom."'. —[Mr. Wrigglesworth.]

Brought up, and read the First time.

Mr. Wrigglesworth: I beg to move, That the clause be read a Second time.
As the House knows, I have an interest in this matter as an adviser to one of the Civil Service unions. The clause seeks to remove a discrimination in the opposite direction to that which my hon. Friends described in the debate on new clause no. 30.
The Finance Act 1977 introduced changes in the rules governing the taxation of earnings of employees living in the United Kingdom but spending short periods abroad on duty. These changes gave significant relief from income tax to a wide variety of employees with jobs which involved travel, but, because of a technicality, Crown servants alone were excluded. In my view and that of the national staff side of the Whitley Council, that exclusion is both unjust and indefensible. The new clause provides the opportunity to rectify the anomaly.
Under the provisions of the Finance Act 1977 an employee who works abroad for a total of 30 days or more in a tax year, whether continuously or in aggregate, is now entitled to a deduction of 25 per cent. from the earnings for the duties performed overseas. The anomaly that I seek to rectify occurs in the application of this 25 per cent. deduction. Because of the mistaken impression—there can be no other explanation—that all Crown servants who would otherwise have come into the ambit of the new rules were already in receipt of the non-taxable foreign service allowance, all Crown servants were excluded from the new relief when it was introduced in the 1977 Act. But in fact many United Kingdom-based Crown servants whose work takes them abroad do not receive the allowance. The object of the clause is to put this group of Crown servants on the same basis as other United Kingdom employees.
In practice, the effect will be to extend the 25 per cent. deduction to those Crown servants who are out of the country on short visits abroad on official business which in total aggregate to 30 days or more in a tax year. Crown servants who are permanently abroad—for example, embassy staff and others—qualify for the foreign service allowance and will thus, rightly in my view, be excluded.
I should stress, in view of the comments made by some hon. Members in the debate on new clause no. 30, that I am not asking for civil servants to be put in a privileged position. On the contrary, I am asking for equal treatment with that now numerous class of employees with jobs based in the United Kingdom which involve a significant amount of foreign travel.
The present inequity shows itself, for example, when a joint delegation, composed of members from a nationalised industry, trade unions, the professions and United Kingdom based civil servants, attends an international conference or goes as part of a trade delegation to help boost exports from this country. All members of the delegation, except for the civil servants taking part, would have the days spent abroad counted towards the 25 per cent. deduction and get the relief. That is not fair and cannot have been intended by Parliament when the 1977 Act went through. It is discriminatory and inequitable. I hope that the Government will support my attempt to rectify this situation by accepting the new clause.

Mr. Hal Miller (Bromsgrove and Red-ditch): I should also preface my remarks by declaring that I am the honorary consultant for parliamentary affairs to a Civil Service union, but I do not think that has unduly coloured the remarks that I am about to make on the new clause.
This is one more example where the Government's attempts to get rid of any possible abuse relating to the taxation of earnings derived from work abroad has led to the creation of further anomalies about which the hon. Member for Thomaby (Mr. Wrigglesworth) has just spoken. I find it a matter for disbelief that people attending conferences abroad should qualify for tax relief. I had imagined that the tax relief was intended to assist and promote the activities of business men and others abroad seeking to maximise this country's foreign earnings, not those who go abroad to attend conferences.
11.15 p.m.
A regrettable incentive has been introduced by the Government for people to prolong their conferences and business trips. During a recent parliamentary delegation I visited an embassy and I was told that business men and others seemed to be spending rather longer than necessary abroad in order to qualify for the deduction.
I am not wholeheartedly in favour of the present system, nor of extending it to civil servants, but there is a serious anomaly which should be considered. I am sorry that no Minister from the Civil Service Department is here today to take

part in the debate. My suggestion is that the eligibility for foreign service allowance should be reviewed. There is a good case for that. The Think Tank report, despite its being discredited in some of its recommendations, is likely to lead, according to press comment, to an increase in home-based civil servants going abroad. This anomaly is likely to become more extensive and more resented.
It might be better for the Government to say that the conditions of eligibility for the foreign service allowance will be reviewed, rather than that the new clause should be carried. I fear that the new clause seeks to perpetuate an unsatisfactory situation regarding eligibility for a reduction of tax merely for visits and other conferences which are not designed to promote our foreign earnings.

Mr. John Ovenden: I support the new clause. I declare an interest as adviser to the Society of Civil and Public Servants.
The intention of the new clause is not to place civil servants in a privileged category for taxation purposes. It is intended to place them on the same level as everybody else and to give them the advantage of the tax concessions which already apply to people in private industry. It is not our job to argue about the merits or demerits of that concession. It is on the statute book. Since that concession exists it is wrong that one group of workers should be debarred from taking advantage of that concession.
The Government's attitude has, perhaps, been based on a misconception—that all civil servants abroad enjoy a tax-free foreign service allowance. That is true only for civil servants who spend four months or more overseas. It does not apply to civil servants who spend shorter periods abroad.
It could be argued that the tax concession was intended to promote our export drive and to give special help to those involved in such promotions. But that is not the way in which the concession is framed. It is available to everybody in private industry involved in overseas visits. Only public servants are excluded. That is discriminatory and unjust. I hope that the Government will accept this sensible new clause.
If the Government do not accept it I shall be interested to hear why they


believe that this discrimination against the public sector should continue. It seems only just that a concession that exists in private industry should be extended to people in the public sector, too. People in the public sector have suffered a great deal in the past from Government discrimination on all sorts of issues, not least in pay. I hope that the Government will not continue the extension of that policy into taxation.

Mr. Robert Sheldon: The new clause is aimed at remedying what my hon. Friend the Member for Thornaby (Mr. Wrigglesworth) sees as an injustice to civil servants. Crown servants generally obtain tax-free allowances for working abroad, and they are held to be compensation for the duties they carry out while out of this country. The clause offers Crown servants who work overseas a choice between tax-free allowances and tax relief under the Finance Act 1977. My hon. Friend was right in pointing out that the justification for excluding Crown servants was that the 1977 Act was intended to give incentives to those at the sharp end of exporting, as my right hon. Friend the Chancellor of the Exchequer put it at the time.
My hon. Friend is proposing a broad relief which goes further than that. To extend the provision to civil servants would be quite beyond the original intention of the 1977 Act. Moreover, under the new clause Crown servants who were away from this country for a year or more would get total tax exemption on their salaries and would not be liable for taxation by the host country.
That is the distinction between the private employee and the Crown servant. The Crown servant who was away for more than a year would get total exemption on his salary, but he would not be liable for tax to the host country. On the other hand, the private sector employee would get exemption from the United Kingdom tax for more than a year's stay abroad, but he would be liable to tax by the country in which he worked. The Crown servant, therefore, would have a distinct advantage in those circumstances.
I believe that the distinction we have drawn is justifiable. I understand the problems concerning the reliefs given in the 1977 Act. It would be wrong to

extend those reliefs in the manner sought, and I regret that I am unable to accept the new clause.

Mr. Wrigglesworth: My right hon. Friend's reply has illustrated the misunderstandings which arise over this matter. The allowances to which he referred apply only to those working abroad for over four months, as I understand it. That is not the category of people we are seeking in this clause to assist. We are trying to help those who work abroad for much shorter periods. We are not seeking to help those who receive the foreign service allowance. Clearly, they are not entitled to this sort of concession. We are concerned with a different category.
My right hon. Friend said that these provisions were introduced to assist exports. It is, however, extended to everyone, irrespective of whether they are working to assist exports, including—and here I correct a false impression that may have been given—those in both the private and public sectors who are working abroad for 30 days and may not be connected with exports.
Secondly, there are civil servants in this category who are helping our export drive. They are going abroad to trade fairs and other such events, and one would hope, therefore, that the same sort of reliefs as are given to members of the staff of nationalised industries and private companies could apply to them, too.
If the Financial Secretary is not prepared to accept the new clause tonight, I ask him to think about it again and consider with the national staff side, possibly through the Civil Service Department and his other right hon. and hon. Friends, whether some agreed solution can be brought forward in the next Finance Bill so that the injustice which civil servants believe to exist may be put right in 1979.

Question put and negatived.

New Clause No. 44

AMENDMENT OF SECTION 20 OF THE FINANCE ACT 1974

'Section 20 of the Finance Act 1974 shall be amended by the addition to subsection (1)(a) thereof of the words "to savings-related share option schemes approved under Part III of


Schedule 8 to the Finance Act 1973; and" and by the addition to subsection (1)(b) thereof of the words "to savings-related share incentive schemes approved under Part II of Schedule 8 to the Finance Act 1973; and".'.—[Mr. MacGregor.]

Brought up, and read the First time.

Mr. MacGregor: I beg to move, That the clause be read a Second time.
As those hon. Members who were on the Standing Committee will know, this will be a re-run of the very short debate that we had in Committee rather late at night—in fact, somewhat later than the hour at which we are to discuss the matter now.
It is right to bring the new clause back on Report. It relates in an important way to the clauses now numbered 42 to 49, the profit-sharing clauses. The reason why it is right to bring it back again now is twofold. First, our debate in Standing Committee was brief, and, if I may say so, it seemed to me that the Financial Secretary did not take seriously the points which were then raised. I am glad to see that the Minister of State is to respond to this debate. The Financial Secretary did not reply to even one of the points which we raised, and one reason for this debate is that it gives us an opportunity to elicit from the Government a reply to the arguments in favour of the clause, since the response in Committee was wholly unsatisfactory.
The second reason stems from what the Financial Secretary said at the end of his reply:
Of course, further consideration will be necessary and the matters raised by the hon. Gentleman
—referring to me—
will form part of the examination.
Since the right hon. Gentleman clearly did not understand most of the points made in the debate, we have given him time since then to look again at the new clause, and, as I say, I am glad that the Minister of State is to reply.
It is worth noting that on Report we have about 99 new clauses, new schedules and amendments to the Bill as a result of our debates in Committee. That shows the importance and value of our Committee process. We made many valid points at that stage, and the new clause raises yet another. A new clause of this

kind will be important if profit-sharing schemes are to succeed at least in about 50 of our major companies.
In Committee, the Financial Secretary made three points to show why the new clause should not be accepted, and I shall deal with those before coming to our constructive reasons for bringing it forward again. First, the right hon. Gentleman said—this will be familiar to those who took part in the Standing Committee, but perhaps not to others—that what we were trying to do was to bring back the same tax reliefs or reliefs on a somewhat equivalent basis for the SAYE share option schemes permitted under the Finance Act 1973. He gave as his first reason for rejecting that that under the 1973 share option scheme, as he put it, an employee did not necessarily get any shares at all, he may not have exercised his option, and there was no compulsion for him to do so.
There are two answers to that. First, the employee may have exercised his option, and he may therefore have shares under the share option scheme which will get no tax advantages because of the change in legislation made by this Government in the Finance Act 1974, which removed all the tax advantages of the original 1973 scheme. Also, an employee could renounce his right under the present scheme, so that he would get no shares at all. That is not a valid objection to trying to put the 1973 scheme on the same basis.
The Financial Secretary's second reason was:
In introducing the profit sharing scheme
—the one in this Bill—
we implemented what was desired by the majority of firms which made representations to us.
His point was that, in the original Inland Revenue document, produced in December last year, which led to the current profit sharing proposals, there were three possibilities, the second of which was a share option scheme and that because the majority of firms preferred the third option—the one in the Bill—there should be no changes to put the 1973 scheme on the same basis.
11.30 p.m.
That is a strange argument. Although the majority of firms preferred the third option—it is the one that I myself find


most attractive—we should not exclude the minority who originally introduced share option schemes. The Financial Secretary was basically saying, "Bad luck," to the 50 major companies which have introduced such a scheme: "Because everyone else went against you, you will be at a disadvantage compared to the many who will be allowed to introduce a scheme of their own." But that is a bad argument as well.
The Financial Secretary's third argument was that he did not oppose share option schemes under the 1973 Act. They can continue—admittedly, without the tax advantages. He said:
… I see no reason why they should not fall to be considered subsequently in the light of the development of profit sharing schemes."—[Official Report, Standing Committee A; 27th June 1978, c. 1802–4.]
The point that he has completely failed to take into account is that already many of the companies which introduced profit-sharing schemes under the 1973 Act are aware that they will be put at a disadvantage. We shall not need many years' experience of the new scheme to know that.
I see no reason why the Financial Secretary should say that we should wait and see and that if my predictions are proved correct that can be put right in a subsequent Bill. We know from representations that they have made that the companies already feel that they will be disadvantaged. I see no difficulty in putting that right quickly, so that both sorts of scheme can go ahead on the same basis.
So all three arguments were very weak. What is more important, he did not deal with the points we put forward to show why the companies which had already implemented share option schemes felt that they were disadvantaged.
On that occasion, I galloped through my five arguments why the 1973 schemes should have some tax advantages restored to them. I do not intend to go on at length, but it is important that they should be restated, because they should be answered, as they were not on that occasion.
First, it is generally conceded that now that employee share schemes are to be encouraged by all parties—we are delighted at the conversion of this Govern-

ment to the concept—companies should be sure of a period of tax stability to enable them to introduce the schemes and encourage their employees to take them up without tax changes for a reasonable period. The Financial Secretary was not taking account of that point when he said in Committee that we could again change the tax advantages of the 1973 scheme if that proved necessary in the light of experience. He suggested that at some point we might actually do what we are asking the Government to do now. I believe that in the interests of general stability that step should be taken as soon as possible.
The second argument is that the tax treatment of the different employee share schemes should be as equitable as possible. I repeat the point I made in Standing Committee, that it is not only illogical but biasing the argument in the wrong direction that the tax treatment of an employee who has acquired his shares through the scheme under the present Bill and to which he may not have had to contribute should be better than the tax treatment of the employee who has had to contribute his savings over a period of five years in order to acquire his shares under the original share option scheme, in that at the end of the day the employee who is given his shares finds that he is in a better tax position than the employee who has saved up over five years to acquire them.
That is illogical and unfair. It is made doubly unfair because of the third point, which is that many employees in the companies which have already introduced 1973 share option schemes will find that they will be unable to take advantage of the profit-sharing scheme envisaged in the Bill.
It is important to spell this out for the benefit of those who did not take part in our debates. The reason is that many of the 50 major companies which have already, without the tax advantages, decided to introduce 1973-type share option schemes will find that they are unable to participate in this type of scheme because they will already have allocated a certain amount of their equity to the previous scheme. Perhaps many of their employees will not necessarily take them up, but at this stage the companies do not necessarily know that, and


many of their institutional shareholders may well be reluctant to see an extension of profit-sharing schemes for employees because they know that at present there is an option for a number of their own employees to take up new equity.
I must say to the Chief Secretary, who I see is looking at the clock, that I was misled last time: I ran through these arguments but received no answer from the Financial Secretary. Therefore, I am prepared to continue tonight until I do.
Many of these companies feel—they feel this at present, because they have made representations to us—that they will not be able to take advantage of the provisions of this year's Finance Bill because they already have a potential commitment to the extension of their equity to their employees as a result of the SAYE share option schemes. This could be a real hindrance in many major companies to the extension of this type of profit-sharing scheme.
The fourth argument follows on directly from that. This is very unfair to the employees in these 50 companies because, as I said earlier, they will not have in the SAYE scheme they have taken up tax advantages of the sort that we see and welcome in this 1978 scheme. They will see that their companies, which in a very enlightened manner were taking advantage of the 1973 SAYE scheme, are disadvantaged simply by nature of the fact that this year's Finance Bill introduces better taxation advantages than the original 1973 Act—in fact, not the 1973 Act, for in 1974 the Labour Government removed the tax advantages given in the 1973 Act.
The final argument, which I should have thought would appeal to the Government, is that there could well be an implication for national savings as a whole if the type of change that we advocate in the new clause is not made. As I indicated in Standing Committee, I understand that the total value of all SAYE contracts linked to share schemes so far is about £45 million to £50 million which is about 10 per cent. of all SAYE savings. It is important that it should be understood that the tax advantages now being extended to other schemes should also be available to those SAYE schemes. There is, therefore, an implication for National Savings as a whole.
I make no apology for bringing back this new clause on Report. The three arguments we had from the Financial Secretary in Committee were inadequate. There was a total failure to deal with the five points put forward from the Opposition Benches about the disadvantages of not extending some tax benefits to the SAYE schemes introduced by the previous Conservative Government, whose tax advantages were removed by this Government. Above all, it seems to be inequitable that we should have a situation whereby, because the Government have happily changed their mind about the advantages of employee share schemes and given tax benefits, they should positively discriminate against the employees of the companies which were sufficiently enlightened earlier, before the Government's conversion, to introduce these other schemes.
For all these reasons it seems right to press that the SAYE schemes introduced in 1973 and then hit in 1974 by the Government should as a result of the change of heart on the part of the Government, be brought into line and given the tax advantages which we welcome in this Bill.

Mr. Denzil Davies: The hon. Member for Norfolk, South (Mr. MacGregor) has gone through the five points made in Committee, arguing for an extension of the tax reliefs under the profit-sharing arrangements in this legislation to share option schemes. He did not argue for share incentive schemes, as I understood him. I believe that there is a difference. Many of the share option schemes take advantage of the SAYE system and were originally introduced by the previous Conservative Government in 1973.
The hon. Member asked why cannot the tax incentives in the Bill be given to the share option schemes. I am sorry to have to give the same answer as he received in Committee. I know that the hon. Member does not like it and will say that the point has not been dealt with, but it is being dealt with. It is just that he does not like the answer because it does not accord with his views. The point is that a share option scheme is different in nature from the kind of profit-sharing scheme being put forward in the Bill.
The hon. Gentleman gave the game away because he said that in a share


option scheme a person has to contract in to get shares. In other words, a person has to opt for his shares. He sought to draw a distinction between the present scheme in which an employee can renounce his shares. That is the basic difference. A share option scheme requires a contracting in. The scheme under the Bill requires a contracting out. It is that distinction between the identification with the company which is the basis of the Government scheme and which is different from share option schemes.
After considerable consultation following the publication of the Government's consultative paper—and the third option in that paper was the one preferred by most people—we deliberately decided to go along that road and to give the tax relief to that type of scheme. I accept that it is galling for those who have introduced, since, 1973, other types of scheme. It is galling when tax rates change, when taxation changes. It affects property and contractual rights from time to time. But to suggest that we should look back, at those who have entered into contracts of whatever kind and try to adapt taxation for the future to bring such people into the present tax regime, is going too far and is something that cannot be done in most cases. It is not possible to go back, when tax incentives are given, and changes are made, and try to rewrite contracts for the benefit of those who introduced various schemes in the light of the prevailing tax position but which proved to be not so attractive as at first thought.
I think that what the hon. Gentleman is asking for in this respect is unreasonable, and that is why my right hon. Friend the Financial Secretary could not accept the amendment. The hon. Gentleman shakes his head, but I should have thought that my point is a reasonably fair one. It is not possible to go back and look at all the contracts of all the people who have been affected by tax changes.

Mr. MacGregor: That is not necessary.

11.45 p.m.

Mr. Davies: Of course that has to be done, because the hon. Gentleman is asking for tax reliefs in relation to other

schemes, and we have decided that this kind of profit-sharing scheme, where the individual is indentified with the company, is the one that we favour and the one that most people favour. It is unfortunate for those firms which chose to go along another route, but it is not possible at this point of time to introduce another kind of profit-sharing scheme along the lines that the hon. Gentleman is asking.

Mr. MacGregor: Would the right hon. Gentleman not agree that a number of companies—not all the 50 but a number of companies—introduced the SAYE scheme on the basis of the original 1973 tax advantages, and that it was this Government which came along and removed them?

Mr. Davies: I accept that entirely. It happened in 1974. But is the hon. Gentleman saying that Governments are not entitled to change taxation or to impose taxation or to relieve from taxation? This surely is not a proposition which I would have thought he would normally put forward. It is unfortunate that this has happened, but people in business and in industry know the position very well. People who enter into commercial agreements fully appreciate that taxation and tax rates can change. This is a fact of life with which, reluctantly perhaps, they have to live, and that is the answer to the hon. Gentleman. We have introduced a major profit-sharing incentive in this legislation. We feel that this is the best way to do it. We are talking about tax relief and we think it right that tax relief at the moment should be confined to the schemes introduced in this Finance Bill.

Mr. Nelson: I wish to intervene, only very briefly, to support my hon. Friend the Member for Norfolk, South (Mr. MacGregor), because it seems to me that, both in this debate and in the one that we had in Committee, the Treasury Ministers have been unduly obstinate.
The case put on its five points by my hon. Friend seems to be both persuasive and powerful. The Bill seems to me to be unduly prejudicial towards the many companies which entered into the 1973 scheme. In particular, many of those companies will have been the most adventurous and the most concerned at the time to ensure that their employees had an association with and a binding


loyalty to the companies. In many cases these are exactly the sorts of companies within which the Government should now be anxious to encourage employees to benefit under the sorts of schemes provided in the Bill.
I think that it will be extremely difficult to dismantle the old schemes and set up the new schemes. In addition, while accepting the point about contracting in and contracting out, and the difference that this implies, there are other points as well. Clearly, under the scheme included in the present Bill, whereby shares are allocated on an annual basis to employee trusts, there will be an income in the form of dividends coming in from those shares which will be held in trust for or go to the benefit of the employee, whereas under a share option scheme there is no such income coming in until the option is exercised and the shares are required by the employee, and dividends will accrue only as from that date.
In an additional way, the individual is prejudiced by having accepted the 1973 scheme. On top of that, insult is added to injury and he does not get the same preferential tax treatment as is provided in the Bill. It seems to me, therefore, that on the basis of equity and on the basis that the five points put by my hon. Friend have not been accepted—and above all because the Government have done a somersault on their own policy, in that they reversed their own support for such schemes and then introduced a new sort of scheme—this sort of anamolous treatment and this sort of reversal of policy acts to the prejudice of consistency on which industry should be urged to make provision for and to give encouragement to its own employees. The new clause moved by my hon. Friend is persuasive and should be supported.

Mr. Nigel Lawson: My hon. Friend the Member for Norfolk, South (Mr. MacGregor) led the Committee through Part III of the Bill dealing with profit sharing with clarity, perspicacity and assiduity and did a service to the entire Committee. He has now added to that by his service to the House on Report in putting forward more fully than he was able to do in Committee the Opposition's argument about the treatment by the Gov

ernment of Save-as-You-Earn share option schemes.
I have never heard such a deplorably dog-in-the-manger attitude as that expressed by the Minister of State. The facts are that the last Conservative Government introduced an employees' share ownership scheme with a tax incentive in the 1973 Act. This was the SAYE share option scheme. The first act of the present Government was to destroy that employees' share ownership scheme. That was in 1974. Now, four years later, they come forward with a scheme of their own.
We welcome the Government's turn round. We welcome their U-turn. We welcome their belated conversion. We do not say in a dog-in-the-manger way, as the Minister of State does, that because it is not the scheme that we devised, we are opposed to any tax incentives, tax concessions or tax remissions being attached to the scheme. We welcome the scheme that is in the Bill. But that is precisely in reverse what the Minister of State is saying. Because the SAYE share option scheme is not a scheme that this Government thought up—indeed, it is a scheme from which they removed the tax incentive—he argues there must be no tax incentive for it at all. It is a deplorable, petty and small-minded attitude, and one which does the Minister of State no credit.
The Minister did not give the real reasons for his objection. However, the ostensible reasons which he gave rested on two different arguments. First, he drew a distinction between a scheme where the employee had to contract in to get the shares and a scheme where the employee contracted out. But this is a distinction without a difference, because it does not matter. At the end of the day, what is important is that the employee is a shareholder in the company for which he works.
There is that distinction, but it is no distinction on the basis of which the Minister can say that there should be a tax incentive for one and not for the other. Indeed, there are many trade unionists who would prefer the scheme where the employee chose voluntarily whether to have the shares in the company for which he worked rather than those shares being part of his emoluments which he cannot take in another form very easily.
The other objection raised by the Minister of State was even more far fetched. He implied that there was some great administrative difficulty, and that it would be necessary to go back over all the records to discover all the companies which had such schemes and for which tax concessions they would be eligible.

Mr. Denzil Davies: I did not say that.

Mr. Lawson: In that case, it is impossible to understand the point of that section of the right hon. Gentleman's speech, because that was the only conceivable point that he could have had.
The 54 public companies which have since 1973 incorporated and introduced SAYE share option schemes employ about 750,000 people. Of those 750,000, more than 20 per cent have taken up voluntarily these share option schemes. The figure would have been considerably greater had not the present Government removed the favourable treatment in the 1974 Finance Act.
Therefore, this is a very important phenomenon. It is an important and substantial development and it is not something just to be brushed aside simply because it is different from the scheme that the Government have put forward. There is no reason whatsoever why these two schemes should not sit side by side. The House does not have to decide which is the better of the two.
The Minister of State gave a very inadequate answer, but I do not want to detain the House much longer because there are other new clauses to discuss tonight. The Financial Secretary, when he replied to this debate upstairs in Committee, said this about the Save-as-you-Earn share option schemes:
I see no reason why they should not fall to be considered subsequently in the light of the development of profit sharing schemes." —[Official Report, Standing Committee A, 27th June 1978; c. 1804].
That is very interesting. It is a most obscure statement. What evidence is the Financial Secretary looking for? What is he saying? Is he saying that if the employees' share ownership scheme introduced in this Finance Bill turns out to be a lamentable failure and there is a negligable take-up, only in those circumstances will he contemplate a tax incentive for the SAYE schemes?
Whatever the experience of the success or failure of the present scheme—and we wish it well—that is no argument one way or the other for discriminating against the SAYE share option scheme. All the evidence is already there of the difficulties companies are having in introducing this new scheme on top of their existing SAYE share option schemes. These are facts that are there for the Minister of State to see. He does not have to wait until some time in the future to discover this.
The meaning of the Financial Secretary's undertaking is therefore totally obscure. From his remarks and those of the Minister of State, it is obvious that neither of them has really understood what this issue is about. It is about time that they applied their minds to it.

Question put and negatived.

New Clause No. 48

NON-TAXABILITY OF LOTTERIES FOR CHARITABLE PURPOSES

'The proceeds of a lottery to be applied to purposes of a society in accordance with section 5(4) of the Lotteries and Amusements Act 1976 shall not be brought into account as a receipt of trade and shall not constitute profits of trade for purposes of taxation.'.—[Mr. Newton.]

Brought up, and read the First time.

Mr. Newton: I beg to move, That the clause be read a Second time.
This new clause, as will be evident from its title, concerns the tax treatment of the proceeds of lotteries. It is the second new clause today which has arisen in some measure from the interests and activities of Motability, in connection with the disabled. Motability is not merely a car-leasing scheme to turn the mobility allowance into cars on the road. It is also an organisation that is seeking and hoping to raise charitable funds to assist disabled people who would not otherwise be able to run and maintain a car.
One of the things Motability has turned its mind to, in conjunction with professional advisers—in this case Little-woods Pools—is the possible running of a lottery within the terms of the 1976 Lotteries and Amusements Act.
Although this point has come to my attention as a result of the concern of


Motability, it does have much wider effects and implications. I used that illustration only as an example of the kind of organisations that could be worried about the present situation.
The problem is that the net proceeds of a lottery are, or in many cases will be, taxable as trading profits. Motability has been advised that a lottery of the kind it is contemplating having run for is by a branch of the Littlewoods Pools firm would give rise to a tax liability—corporation tax at 52 per cent. Since there is a little uncertainty about the tax position, I see this clause as a probing one. I wait with interest to hear what the Minister has to say. Valuable and worthwhile organisations are worried about their tax position and are considering whether it will be worth while their running lotteries at all.
12 midnight.
Let me make clear what kind of societies we have in mind. I refer to the definition of "society's lottery" contained in the Lotteries and Amusements Act 1976. They are defined in the following terms. First, a society established
wholly or mainly for … charitable purposes";
secondly, for
participation in or support of athletic sports or games or cultural activities";
and, thirdly, for neither of those purposes but purposes which are not for
private gain nor purposes of any commercial undertaking".
Although the word "charitable"—in the sense that one does not normally think of sporting clubs as charitable—might be taken as a little wide in this context, we are very much talking about societies and lotteries run for the purpose of societies which are in no sense conducted for private or personal gain and are for fairly broadly public purposes and for the good of a number of citizens. Therefore, we are in no way talking of commercial activities, and it is a legitimate worry if there is a possibilty of their losing a large part of the money intended for the benefit of those activities through a large corporation tax charge.
Various schemes have been suggested to avoid this problem, including specifying a part of the ticket which is to be specifically set aside as a donation. But it has been pointed out that one conse

quence of the earmarking of part of the ticket—even if it were accepted by the Inland Revenue as avoiding a liability to corporation tax—would be that at the same time it would create the risk, if all the tickets were not sold, that there might not be enough money to pay the prizes and to meet the expenses. Therefore, the whole operation could become impossible because clearly no promoter will want to run a lottery at a loss, having given a specific undertaking about how much will go to the charity.
That does not seem to be a solution. Therefore, it has been represented to us that the point should be tackled by Parliament to make it quite clear and sure that there will be no substantial impost of corporation tax on the proceeds of lotteries intended for such purposes so that the charities or other bodies of a charitable kind shall enjoy the full benefits of their promotion and their work.
Underlying this is the general agreement on both sides of the House that in the current and future context of our ability to finance out of public expenditure, we have a common interest in promoting to the maximum extent the flow of voluntary funds into activities of this kind. I hope that Ministers will share that view and will consider this point sympathetically with a view to seeing how it can most suitably be met.

Mr. Robert Sheldon: The hon. Member for Braintree (Mr. Newton) moved the clause in a probing manner because he thought that there was some uncertainty about the position. He went into some detail about worthwhile organisations—and obviously charities are all in that category—and explained some of the anxieties which they have expressed to him about their futures. The hon. Gentleman dealt with the three categories of lottery and what he said was correct.
Within the tax system, these categories have tax exemption under the small lotteries provisions. The profits of lotteries are normally subject to tax, but if tickets include a statement that part of the price is a donation, that element is not considered as part of the profits. The hon. Gentleman drew attention to the risk that if insufficient tickets are sold, the sponsor society will have to separate the donation element from the prizes which will have to he paid and which may amount to more than the receipts. But the hon.


Gentleman will be aware that societies have always faced the risk that they may end up out of pocket. Nothing has been changed.
What has altered is that some lottery organisers feel that they need to operate on a larger scale because the trend is towards higher lottery prizes and organisers feel that they must offer more attractive prizes. Once they move into that area, there are dangers for them.
No tax has so far been imposed on the lotteries to which I have referred. It may be a problem for the future as the lotteries try to become larger and to provide bigger prizes. We shall watch that with care and with the same sort of concern as the hon. Member for Braintree has shown in tabling the new clause.
The debate is most peculiarly timed because it comes on the eve of the publication of the Royal Commission report on gambling. We know that the report includes a detailed examination of the law relating to lotteries. We look forward to seeing what it has to say—probably on precisely the point covered by the new clause.
Changes are obviously taking place, and because we have at heart the wellbeing of the charities that benefit from such lotteries, we shall watch the position. As I mentioned earlier, no tax has so far been imposed on the income from these lotteries. We shall see what the Royal Commission has to say and if there is a need to change the provisions in existing legislation, we shall have time to come back to it in the next Finance Bill.

Mr. Graham Page: With respect to the Financial Secretary, he has only confused the issue. I had understood that these lotteries were free from taxation. That was the sort of statement made during the course of the legislation. The whole point of extending the freedom to undertake the larger of the small lotteries was to provide money for the sort of activity that might otherwise have to be supported by taxation. Charitable objects, cultural objects, amenities, and so on, are items which would otherwise have to be financed out of taxation in one form or another, local or central. Therefore, it seems rather foolish to tax that money and then divert what is taken in taxation

back into exactly the same cause. Far better to leave the income from lotteries free of tax.
The right hon. Gentleman said that so far the income has not been taxed. But he is now holding a sword of Damocles over the heads of those who have raised money in this way in that they may be liable for taxation. I do not know from his speech whether they are liable in law, or whether the law would have to be changed to make them liable.
We know that the report of the Royal Commission is expected shortly, and it is perhaps wise to wait and see what it says and to frame legislation on it. But I hope that the Government will not be looking for revenue out of the proceeds of these lotteries. At the moment the lotteries are successfully providing amenities, cultural facilities, sports facilities, and so on, and anything which will deter those who are raising the money for such purposes would only do harm to the country and not good. I hope for some assurance that the Government will look at this very sympathetically and not seek to recover a lot of revenue out of the proceeds of lotteries.

Mr. Nelson: I support my right hon. Friend the Member for Crosby (Mr. Page). He has been somewhat stonewalled by the Financial Secretary. As I understand it, money raised by lottery is of itself taxable in the same way as any other trading income, but if the recipient is a registered charity, or does not pay tax, it does not incur such a liability, and the provisions for apportioning an element of donation may circumvent that liability in certain cases.
But an important point to make is that, as I understand it, the Lotteries Act enabled for the first time many local authorities to offer such lotteries—my own authority, the Chichester district council, has one every weekend to raise money. They are major recipients of income from such lotteries and pay no taxation. Other registered charities which are now enabled by legislation to use lotteries as a means of raising revenue do not have to pay tax. Yet those associations and societies with quasi-charitable or social aims, such as athletics and those described in the Act, may fall within the taxable remit. This seems to me to be unfair in that the


Act itself set out and limited the authorisation on lotteries to those specific categories. It would seem to me to be a fairly modest but desirable confirmation of that benefit to ensure that such income was not taxable.
It is perhaps arguing against what I have said so far to some extent, but if one is to provide tax relief for the trading income from lottery revenue for societies which are not registered charities but may have semi-charitable purpose, one is making a qualitative judgment as between different forms of trading revenue from those societies. Some society may operate certain other trading activities to raise income for its purposes—for example, for establishing a local community sports ground. In the normal course of events the trading income, if the charity is not registered, is taxable.
However, if the new clause is accepted, any income that is gained by way of a lottery would not be taxable. Therefore, there is a qualitative judgment being made between different forms of revenue raising schemes for non-registered charities in respect of societies as are defined under the Lotteries Act. That distinction needs to be supported if we are to give full support to the new clause.
With that reservation, my general support is for the new clause. It seems that it is the underlying intention of the Lotteries Act that a new form of revenue raising should be open for such societies. As they now have to go to the cost and complication of apportioning a donation element within their lottery ticket to circumvent tax liability, it seems easier and more equitable if we eradicate the need for that by ensuring that the revenue from lotteries is relieved of tax liability.

12.15 a.m.

Mr. Peter Rees: As always, my hon. Friend the Member for Braintree (Mr. Newton) must be congratulated on having forced out into the open a point of some difficulty. However, I cannot say the same about the Financial Secretary's intervention. If anything, he left the position rather more obscure than before.
As I understand the right hon. Gentleman's reply, he said that the proceeds of lotteries have not so far been taxed as the fruits of a venture in the nature of trade but that there is a basis for so

doing and that they might be in future. That must be cold comfort to those who may embark on such activities in future. The right hon. Gentleman mutters. It may be that he wishes to intervene to make matters plain. No, it seems that he does not wish to do so. He is a little over-confident about the clarity of his own words. We shall be studying in Hansard tomorrow exactly what he said. However, as he spoke from the Dispatch Box I was left in some doubt. I suspect that my hon. Friends were left in doubt.

Mr. Robert Sheldon: I thought that I had made it plain. I was replying to the remarks of the hon. Member for Braintree (Mr. Newton), who accepted that the present position is that charities will not be paying tax on the lotteries because of the explicit donation element in the ticket prices.
There are two elements in the price of a lottery ticket. One element is the donation and the other consists of the prizes and administrative costs. It is usually sensibly arranged that the donation is a considerable part while the prizes and administrative costs make up the lesser part. On that basis the charities pay no tax. As the hon. Member for Braintree observed, to meet growing competition charities could reduce the donation element. If they do that and do not sell enough tickets, they may find that they have to reduce the donation element considerably. In that way they could find themselves liable for tax in future.
As I said, that is a problem for the future. I thought that the hon. and learned Gentleman understood that simple point.

Mr. Rees: The Financial Secretary underestimates the problems that are faced by those who organise lotteries. I am not persuaded that there are all that number of instances where there is an explicit statement about the amount to be regarded as a donation. There may be a distinction between those who organise lotteries repetitively for their own purposes and those who do it to create funds that may be passed on to quasicharitable or public enterprises, and even for party purposes. There are many fine lines and distinctions to be drawn. The matter is nothing like as clear as the right hon. Gentleman would have us believe.
It is not the occasion on which to press the matter to a Division. The right hon.


Gentleman has candidly said that there may be clarification by the report of the Rothschild Commission. I know not whether he has any preview. I imagine that time will be found—I hope that it will be Government time—to debate the conclusions of the Commission so that we may be able to revert to the issue on another occasion.
The right hon. Gentleman was rather unfair to my hon. Friend the Member for Braintree when he said that it is rather a curious moment to debate the matter. We have to take our opportunities as and when they arise in the House. We are not masters of Government time. This was a proper opportunity. I am not satisfied with or, indeed, very much enlightened by the Financial Secretary's reply.
This should be regarded as a first instalment. We put the right hon. Gentleman on notice that we may have to return to this point either on the next Finance Bill, which we are constantly assured will be introduced by the present Government team, or when we have occasion to debate the Rothschild Report.

Question put and negatived.

New Clause No. 53

AMENDMENT OF SECTION 375 OF THE TAXES ACT

'(1) To subsection (1) of section 375 of the Taxes Act there shall be added the words "or in determining whether any person is chargeable under Chapter 2 of Part III of the Finance Act 1976 as being in receipt of a benefit for income tax purposes"

(2) This section shall be deemed to have always had effect.'.—[Mr. Wakeham.]

Brought up, and read the First time.

Mr. Wakeham: I beg to move, That the clause be read a Second time.
First, I should say that I have no interest to declare, only two sons to educate.
The new clause seeks to amend section 375 of the Income and Corporation Taxes Act 1970. Section 375 exempts income arising from scholarships from income tax. That situation has obtained for many years, and I understand that the Government are not seeking to change it now—

at least not directly. The Inland Revenue is seeking to tax the scholarship as a fringe benefit in the hands of the employee where it is able to contend that the scholarship was awarded by reason of his employment. The new clause seeks to put a stop to that suggestion.
Not all scholarships will he assessed in that way. Scholarships won by children of parents whose total income is less than £7,500 will not be assessed; but, as the total value of higher employment includes benefits, not many will fail to fall into the net. The Inland Revenue is not seeking to attach the benefits-in-kind legislation to general awards which are open to the public at large, even if the child is the child of an employee of the company which set up the award.
The first thing to be said about the Government's proposal and the new clause is that these schemes have been brought about because the direct tax rate is far too high. If the direct tax rate on earnings were lower, the advantages of these schemes would disappear. Tax schemes have grown up over the years as the direct rate of tax has been consistently high. This is all part of the squeeze on middle management as a direct result of high personal taxation.
Why is there a change of view at the present time? There is no change of law. The present situation has been accepted and acceptable for a number of years. If the Inland Revenue has evidence that, along with everyone else, it has been wrong over the years, what is the new evidence that has made it change its mind? I do not pretend that for the Inland Revenue to change its mind on a matter of this kind is as bad as bringing in retrospective legislation, but it is unfair.
It does not need words of mine to encourage or discourage the Inland Revenue's interpretation of this clause being tested in the courts—at least judging by the comments that we read in the press. Every citizen—that includes every taxpayer—has the right to test in the courts what the Inland Revenue is trying to do. I have no comment to make on that, except that it is not an even-handed contest at all. The cost of testing this matter in the courts would be substantial for the taxpayer, but cost is not one of the main considerations for the Inland Revenue.
The Government and the Inland Revenue must recognise that the taxpayer is entitled to rely upon established Inland Revenue practice and to make his dispositions accordingly. One man might go to work for a company knowing that that part of his emolument is an educational scholarship for his child. Another man might go to another company without that prospect in mind. To change the rules in mid-stream is unfair.
It is no good the Government saying that they are attempting to make scholarships taxable only from 14th April. Many people make their dispositions a long time in advance. The honourable aspirations of any man include the desire to do the best that he can for his children and to educate them in the best way that he can.
I can imagine the problems of those parents who find having made their dispositions in a way that they thought proper, reasonable and within the law, that the Inland Revenue interprets the law differently. Such parents will face problems because the plans that they have made for their children will be thrown into jeopardy.
I understand the terms of the trusts when awards are wide enough. When the general public is involved there will be no adverse tax consequences. Many existing trusts come into that category. But even that involves an element of unfairness. At this late hour I do not want to make a pure small business case, but it seems to me that a large company will be able to set up a trust with wide terms of reference covering many children who are not the sons or daughters of employees, whereas a small company will not be able to afford to do that for its own employees or for the public in general. I detect an element of unfairness in that.
One can detect in the Government's proposal a Socialist desire to wipe out all independent schools, or at least an attempt to create another problem for them. The new clause seeks to put at rest the fears and anxieties about the Inland Revenue's action, not on new legislation but on existing legislation.
I suggest that the Government proposal is of doubtful constitutional propriety. The Government are acting in an arbitrary way, they are acting unfairly and they are making another attack on

middle management. It is bound to cause much legislation which can arise only by a degree of incompetence by the Inland Revenue. It will work harshly on many innocent people who made their own dispositions in a way which they thought were proper and within the law. It is another attack by the Government on independent schemes.
The way to get rid of this type of scheme is not by fiddling around with the tax laws in this way but by bringing down the rate of taxation. Then we shculd not need schemes of this type.

12.30 a.m.

Mr. Pardoe: I begin by saying that I have no interest to declare in this matter. As far as I know, no company with which I am involved or am likely to be involved is providing any such scheme.
I am extremely worried by what I regard as the Inland Revenue's independent decision. I do not accept the suggestion by the hon. Member for Maldon (Mr. Wakeham) that this is another attempt by the Government to have a go at independent schools. If it were, I could understand a little bettet the timing of the decision. I suspect that this is a case of the Inland Revenue being ferociously independent of Ministers and apparently going completely contrary to the known views of the Secretary of State for Education and Science.
On 4th February last year the Secretary of State made a clear statement in answer to one of her hon. Friends. She was asked whether she would increase the amount of payments that may be made by employers to students following courses of higher education without reduction of the students' grants. She replied:
I propose to amend the Awards Regulations so that as from September 1977 payments by employers to students whom they wish to sponsor, or by institutions which wish to give scholarships, of up to £500 per annum will not be taken into account in the assessment of mandatory awards by local education authorities.
She concluded:
I hope that employers and organisations concerned will take full advantage of this change and that as a result more students will be encouraged to choose courses of direct value to industry."—[Official Report, 4th February 1977; Vol. 925, c. 429.]
There could not have been a more clear-cut decision to break with past practice and to try to encourage industry to do


something about these kinds of scholarships.
In the last week I have had the opportunity to discuss these schemes in detail with one company—Barclays Bank. In the light of what the Secretary of State said, Barclays Bank decided immediately to take up the suggestion of the Secretary of State. In 1977 it set up its student sponsorship scheme for higher education. It gave grants up to a maximum of £500, the amount mentioned by the Secretary of State. They were awarded to students by an independent panel, upon which academics outnumbered the bank's staff vote. The students had to be children of serving staff, pensioners, or widows of staff.
Barclays introduced the scheme, not independent of the Department, not independent of the Inland Revenue. It went to the Department and asked how to operate the scheme, and it got all the advice it could. The Department actually told Barclays that it would help by intervening with the Revenue if the Revenue felt that there were difficulties. That was not necessary, because the Revenue leant over backwards to be as helpful as it could. It approved the scheme without delay or difficulty. It was agreed that the awards were not to be taxable, in the hands either of the students or of their parents.
The scheme has operated for this academic year, but suddenly—we do not know why—the Revenue has turned a complete somersault and has determined that the awards are taxable where the parents' income exceeds £7,500 a year. Why was that not said before? Why did the Revenue not say that to Barclays when it went to the Revenue after the Secretary of State's announcement? It could have said that £7,500 was the tax-free limit, but it did not. Now it has suddenly introduced this stipulation. Barclays Bank has another scheme which is relevant in this connection.
I come now to a point on which I differ from the hon. Member for Maldon. He said that these schemes had come in entirely because of recent high rates of tax. He knows that he and I agree about the inequity of high rates of personal taxation, but in fact many of these schemes have been going for a long time. The

Barclays education scheme started in 1928. I was not around then, and nor was the hon. Gentleman—at least, I imagine not—but I do not think that taxation rates were all that high in 1928. So I do not believe that all these schemes have been introduced specifically for that reason.
The Barclays education scheme started in 1928. It is open to children of staff, pensioners and widows of staff, and exemption from income tax has always been accepted. Indeed, it was confirmed by the Inland Revenue following the Income and Corporation Taxes Act 1970, of which section 375 is the appropirate section.
Barclays Bank now fears that these awards also, which have been in operation since 1928, untaxed, will be taxed as income in the hands of parents if those parents have over £7,500 a year.
I emphasise to the Chief Secretary that these awards have never been seen by Barclays as a fringe benefit for top paid staff. The scheme is open to children of all staff. Yet Barclays fears that the scholarships awarded under the scheme since 1928 will now be taxed. The right hon. Gentleman may say that Barclays has got it wrong and that these awards will not be taxed. But I have described in outline two schemes operated by a major bank, neither of which was introduced as a kind of income tax fiddle. One was introduced in 1928 and the other was introduced as a result of the express encouragement of the Secretary of State for Education and Science and with the connivance and acceptance of the Revenue.
Why has the Revenue made a change now? If these schemes are an emolument—it is perfectly possible to argue that they are—they have always been an emolument. They were an emolument in 1928, and they were an emolument in 1977 when the Secretary of State and the Inland Revenue approved them.
Why have the Government suddenly changed their mind? We shall want some firm comment about that from the Chief Secretary, because he is supposed to be in charge of the Inland Revenue—though it is a God-forsaken job to have, I must say. If the right hon. Gentleman accepts full responsibility and tells us that it was a change of policy on the part of the Government, that is one thing. I


shall have something to say about it if he does, but I do not believe that he will. I do not think that he is in control. I do not believe that he told the Inland Revenue to do this. I do not believe that any Minister has told it to do so. I think that it is all part of the rather twisted narrow political mind of some officers of the Inland Revenue. The Chief Secretary should take them under his own wing and get some control over them.

Mr. Christopher Price: I know that it is against all the traditions of the House for a Back-Bench Member on the Government side to speak on the Finance Bill after midnight, but since I have never spoken on the Finance Bill before in my life and I intend not to do so again, I hope that I may have a minute or two on this issue.
The hon. Member for Cornwall, North (Mr. Pardoe) speculated whether this was a ferociously independent decision of the Inland Revenue or a Government-inspired move. I have not a clue which it is. I think it significant that the man who now runs the Inland Revenue recently moved there from being permanent secretary at the Department of Education and Science, and there may be some connection there. However it has come about, I support what I understand to be the Government's decision to oppose the new clause and I hope that they will persist in that decision.
The hon. Member for Maldon (Mr. Wakeham) seemed to be saying that because a fiddle had been going on for years it was wrong to stop it. At a time when hon. Members on the Opposition Benches are trying to divert money from the public purse into independent education, which caters for a tiny proportion-4 or 5 per cent. at most of the higher age groups and far less of the lower age groups—we on the Government Benches should remind the Government that there is another point of view entirely and that they should not only oppose the new clause but do much more to divert this flow of £120 million a year from the independent sector back into the public purse.
It is fashionable to refer to manifestos as one approaches a General Election, because every party is drafting a new one. One of the few clauses on which the Government have done nothing in the

manifesto for the October 1974 election was the one in which we promised the country that we would divert the charitable and other income. Hon. Members laugh at the presence of the Chief Whip at my shoulder, but I will not be intimidated, even by good friends of mine like my right hon. Friend.
The manifesto promised that we would divert money derived from charitable and other benefits from the public schools back into the public purse. If this move of the Inland Revenue is the first step in that direction, I welcome it. If it is not, I should like to know what the Government are doing in that regard. We want to go into an election saying that we have completed our manifesto.

Mr. Graham Page: On a point of order, Mr. Deputy Speaker. Is it in order for a speaker to be under a threat of some sort by someone outside the Bar of the House?

Mr. Deputy Speaker (Mr. Oscar Murton): This might be a question not of a physical threat but of some sort of moral persuasion, but it has nothing to do with the Chair.

Mr. Price: Although there are folk whose physical proximity I would desire more than that of the Patronage Secretary, I repeat that I am not one to be intimidated. We remain the best of friends however close or distant he chooses to stand.
Just in case hon. Members think that I might be making a party point in mentioning the manifesto, it is worth adding that in 1974 the Education, Arts and Home Office Sub-Committee of the Expenditure Committee examined the whole issue of educational charities and made some recommendations which would have ensured that a large amount of the public funds flowing into independent education as a result of charity law and the attitude of the Inland Revenue towards scholarships might flow back to the public purse.
I realise that the Government do not take much notice of Select Committees. I was very pleased that the members of this Select Committee were absolutely unanimous. It did not have any Liberals on it, but it had Members on it from both sides of the House. Every member of the


Select Committee, from the far Right and the far Left, voted for this proposition.
12.45 a.m.
Therefore, the short point that I wish to make is that although, when all oppose the new clause—I am sure it will not be necessary to vote on it—we shall be doing a great deal of good, I hope that in his very brief winding-up speech my right hon. Friend will not only give the reasons why he will oppose the new clause but will go on to detail all the other measures that the Government intend to take in future, so that this massive subsidy for private education for a tiny proportion of the people can be eroded and the money returned to the public purse, where it can be devoted to the education of the vast majority of our young people.

Mr. Graham Page: I am sorry that the Government Chief Whip has left the Chamber—I was about to invite him to sit next to me, so that he could better hear what I have to say.
I want to tell my hon. Friend the Member for Maldon (Mr. Wakeham) that his new clause is absolutely unneccessary. The Inland Revenue is wrong to try to enforce the tax on scholarships. There can be no doubt about the wording of section 375 of the Taxes Act 1970. It exempts scholarships from tax. Scholarships are not to be treated as income. If scholarships are not to be treated as income, they cannot be treated as benefits in kind. Benefits in kind are taxed, only because they are treated as income.
Section 375 is perfectly clear. It was not altered by section 61 of the Finance Act 1976. Indeed, the Inland Revenue for two years thought that section 61 did not alter section 375 of the 1976 Act. We have this extraordinary press release from the Inland Revenue on 14th June 1978, headed:
Benefits in kind—scholarships for employers' children.
If they are benefits in kind they are income and therefore they are relieved from tax under section 375 of the Taxes Act 1970.
Indeed, the Inland Revenue says this in the press release:
Hitherto the Inland Revenue have not sought to treat as a benefit taxable under Section 61 of the Finance Act 1976 on a direc

tor or higher paid employee, the provision by his employer of a scholarship to assist in the cost of the education of a member of his family. They have refrained from doing so on the grounds that Section 375 Income and Corporation Taxes Act 1970, which exempts from tax income from scholarships, precluded such a contention.
There the Inland Revenue admits that up to the present it has construed section 375—as I contend—correctly. If it now seeks to construe it in some other way, I hope that the victim will proceed in the courts and defend himself against this totally wrong interpretation of section 375.
The extraordinary wriggling of the Inland Revenue in the next two paragraphs of this press statement, where it says that it will not charge scholarship income tax in certain circumstances but will under others seems wholly discreditable in an argument from the Inland Revenue. Let me quote from paragraph 3:
The Revenue will not, however, contend that there is a benefit giving rise to liability under Section 61 where there is only a fortuitous connection between the identity of the recipient of the scholarship and his parent's employment, for example, where a firm sets up a scheme for awarding scholarships which is open to all, but where one of the successful candidates happens to be the child of a higher paid employee of that firm.
Where did the Revenue get this out of the Act? Where did it find this exception? How did it construe section 61 as altering section 375 of the 1970 Act in one respect but not in another? It was said earlier that this is a fiddle that has been going on for some years. It is the proper construction of the law as accepted by the Inland Revenue for the two years since the 1976 Finance Act. If it seeks to alter it now without altering, section 375 it lays itself wide open to an action.
I suppose that I ought to declare an interest as a solicitor and therefore, one who is interested in litigation. I hope that someone will fight the Inland Revenue if they are the victims of this change of mind.

Mr. Peter Rees: I congratulate my hon. Friends the Members for Horsham and Crawley (Mr. Hordern) and Maldon (Mr. Wakeham) on tabling this new clause, which has enabled us to debate in a comprehensive and thorough way the rather unattractive press release which the Inland Revenue put out on 14th June


1978. It has also enabled us to hear the first—and, he assures us, the last—contribution by the hon. Member for Lewisham, West (Mr. Price) to our debates on the Finance Bill. I cannot feel that it really will be his last, unless he has been more intimidated by the presence of the Patronage Secretary than he gave evidence of during the course of his speech.
Why the Patronage Secretary should have taken such violent exception to his hon. Friend's intervention I cannot say. I can only assume that in the run-up to a General Election he is a little worried about the effect on the electorate of the uninhibited Socialist pronouncements of his hon. Friend. He is entitled to make that point and I have no doubt that he will be pressing for that view to be reincorporated in the Socialist manifesto. The electorate will be able to judge. It is a pure point of political principle and it is probably valuable that it should be brought out and debated in the open, even at this late hour, as I have no doubt it will be debated soon throughout the country.
I wish to narrow my intervention a little. This press release is of a singularly confused and disingenuous kind. We are entitled to press the Chief Secretary, if it is he who is to reply on behalf of the Government. It could be that he has devolved this unattractive task to his hon. Friend the Under-Secretary of State for Transport, who is sitting beside him, or the Patronage Secretary's representative, who sat dumbly through our debates in Committee and is no doubt wanting to follow the example of my hon. Friend the Member for Norfolk, South (Mr. MacGregor), who, although carrying a comparable load of responsibility, nevertheless managed to reconcile it with grace and adroitness with some extremely felicitous interventions.
May I be permitted to resume my argument? We are entitled to ask the Chief Secretary why it was that the Inland Revenue thought fit, presumably in the summer of this year, to take fresh legal advice on the impact of section 375 and the general liability to tax of employees whose children are fortunate enough to obtain scholarships under schemes set up by their parent's employers. Section 375 is 'lot by any means a new section. It has been on the state book certainly for 25 years and probably more. I have

no doubt whatever that Somerset House has had occasion to examine it on many occasions.
I am bound to say, with a little diffidence, to my right hon. Friend the Member for Crosby (Mr. Page), for whose legal judgment I have the most profound respect, that I do not find section 375 quite as clear as he would have us believe. It does not say that scholarships are not to be subject to tax; it says that they are not to be brought into computation. That is a quite different and much more refined point, but because it is a refined point one assumes—indeed, this may be inferred from the press release—that the Revenue took legal advice on the question a long time ago.
The whole question of scholarships set up by firms for the children of their employees and others has been the subject of litigation from various angles over many years. Indeed, I have had some small part to play myself professionally in this. I do not think that I need declare it as a positive interest but there has been the Barclays Bank case, there has been the Grind lays Bank case, and there has been the Metal Box case, not precisely on this point, but it is fair to infer that since these matters have been litigated by the Revenue it has been giving very comprehensive thought to the fiscal implications of this type of scheme.

Mr. Graham Page: I should not like to correct my hon. and learned Friend—indeed, he is perfectly right—but it so happens that I have section 375 of the Income and Corporation Taxes Act 1970 before me, and I find that the words are
shall be exempt from income tax, and no account shall be taken as any income in computing the amount of income for income tax purposes.
It is exempt from income tax in the section itself.

Mr. Rees: I do not wish to get involved in a very refined technical argument. I do not know whether I should be in order in doing so, Mr. Deputy Speaker. But the words that I find a little difficult in the section—I give this point to the Chief Secretary—are that it shall be taken into account
in computing the amount of income for income tax purposes.
That is the question which may have to be litigated on some occasion. No doubt


my hon. and learned Friend will bend his considerable professional talents to that point when a lay client approaches him, but I do not want to get involved in my right hon. Friend's professional practice or come between him and his professional or lay clients.
The only point that I wish to make politically from the Dispatch Box is that this is obviously not a novel point to the Inland Revenue, and therefore I ask why it is that the Revenue should have thought fit to take fresh legal advice. Lord McCluskey, in another place, was asked by my noble Friend Lord Boyd-Carpenter a great number of questions on the fiscal implications and why it was that the Inland Revenue was moved to take additional advice. Lord McCluskey said:
The position is truly this. Schemes of this kind were really quite rare until the last year or two, when there was quite a great mushrooming of such schemes, with new varieties and new dimensions. In the light of this great growth of such scholarships, the legal advisers looked at the matter again and, on this occasion, have offered the advice which the Board of Inland Revenue are really properly obliged to take."—[Official Report, House of Lords, 3rd July 1978; Vol. 394, c. 639.]
I hate to say this about a noble Lord who is not in a position to defend himself, but he was either very badly briefed or it was a singularly disingenuous answer. He should know exactly why it was that there was a mushrooming of schemes—

Mr. Christopher Price: A fiddle.

Mr. Rees: It was not a fiddle. If it was a fiddle, it was a fiddle condoned by the right hon. Friend of the hon. Member for Lewisham, West, who presently presides over the Department of Education and Science. The hon. Member for Cornwall, North (Mr. Pardoe) singled out the case of Barclays Bank. He is quite right in thinking that Barclays Bank is very exercised about this question. It is not only to the hon. Gentleman that it has drawn attention to the singular disingenuousness of the Government's position. Barclays Bank has canvassed many people. Indeed, there are many companies which are rightly exercised by this, because there is not only the effect on private education. It strikes at a legitimate provision that they were making for the children of their employees, and not necessarily their richer employees.
I recognise that to Labour Members who, on political grounds, take violent exception to private education this is offensive, but I must refer them to what their right hon. Friend said. The answer was read out ery carefully by the hon. Member for Cornwall, North; therefore I do not need to read the whole of it again. But in case the hon. Member for Lewisham, West—now that he is free from the travail of speaking with the Patronage Secretary at his elbow—might have overlooked this point, I draw his attention to the fact that she ended by saying:
I hope that employers and organisations concerned will take full advantage of this change and that as a result more students will be encouraged to choose courses of direct value to industry."—[Official Report, 3rd February 1977; Vol. 925, c. 429.]
It is plain beyond doubt and I do not think that this point is open to argument. Even the fertile and ingenious mind of the Chief Secretary will find it difficult to construe this in any other way than as a positive encouragement by the right hon. Lady to companies to set up schemes of this kind to encourage their employees, and for employees to take advantage of these schemes, as they legitimately have.

Mr. Christopher Price: Does the hon. and learned Gentleman agree that although my right hon. Friend the Secretary of State for Education and Science talked about courses of direct value to industry, the vast majority of these schemes had nothing to do with such courses but were simply another direct subsidy to middle management with the intention of avoiding tax?

1.0 a.m.

Mr. Rees: The hon. Member puts the matter in a highly emotive way. I do not have the evidence, which apparently he has available to him, that all the scholarship schemes set up by companies have been of a purely academic nature and of no direct value to industry. I do not know. I cannot give him that answer. It may be that he should more properly direct the question to the Chief Secretary or to the Secretary of State for Education and Science.
I assume that the right hon. Lady is intelligent, and she must have been aware of the implications of what she was doing. She must have realised that the encouragement would be taken as encouragement


of a general kind. The fiscal advantages, if that is what they are, are really perhaps a form of amelioration and alleviation of the fiscal disadvantages heaped on middle, lower and upper management by the Administration which in other respects the hon. Member for Lewisham, West supports so loyally. I do not think that this should be given quite that narrow view. I do not think that the right hon. Lady will have been taken by surprise when she learned two years later that they had been more generally applied. Indeed, the three cases which I have cited demonstrate that this kind of scheme has been in operation for quite a long time. This was not some new fiddle, as the hon. Member for Lewisham, West described it. It was not some new device. It had been a legitimate way for firms to assist their employees over a considerable period of time.
The direct question which I ask the Chief Secretary—I hope that he will not shirk it—is: why did the Inland Revenue, having countenanced these schemes and having, presumably, read the reply of the Secretary of State, choose at this late stage to take further legal advice? I hope that there will be plenty of opporunity to evaluate the well chosen words which the Chief Secretary will give us. Whether they will satisfy the Opposition remains to be seen. Whether they will impress the country outside remains to be seen.
I leave aside the educational overtones which so agitate the hon. Member for Lewisham, West. I understand his position, though obviously I do not share it. I know the deep detestation that he and some of his right hon. and hon. Friends feel for the private sector of education. Not all of them share that feeling, because we all know that quite a lot of his right hon. and hon. Friends have chosen to patronise the private sector of education, and the Opposition, who believe in free choice, welcome and applaud their emancipation from the prejudices which affect so much of the thinking of Government supporters.
I take the debate back to the fiscal implications and the general administrative implications of this proposal. It is wrong for the Revenue to allow a practice to grow up, to give tacit and almost overt encouragement to it, and, after it has run for a period of years, speciously to make

the pretext of taking fresh legal advice about it. After all, we have not seen the opinion. Perhaps the Chief Secretary will place it in the Library so that we can evaluate it. I am sure that it would be of great interest to my right hon. Friend the Member for Crosby, and the House would be advantaged by his professional view of the rightness or wrongness of the opinion.
It is quite wrong, and destructive of any certainty in this matter, to allow the Revenue do this. There have been no decisions of the courts that should have led the Inland Revenue to have doubts about the correctness of its earlier advice.
Above all, in this matter the taxpayer is entitled to expect a measure of certainty. I do not intend to anticipate tomorrow's debates on retrospection, much as I look forward to them. This is a different point. But the same theme runs through our interventions from the Opposition Benches—that is, that the taxpayer is entitled to know where he stands, and that the Inland Revenue should not capriciously go to counsel and shop around until it finds an opinion that will substantiate what I suspect to be a change of political heart. I do not believe that Somerset House is to blame here. I suspect that there has been a nudge and a wink from on high that it might be no bad thing if the Inland Revenue started to lean on these kind of schemes.
What this tells us about the relationship between the Chief Secretary and the Secretary of State for Education and Science I do not know. It is not for me to speculate. We shall wait for some latter-day Crossman to tell us exactly what went wrong there—or what went right. Perhaps the Chief Secretary will tell us. I am much looking forward to his intervention.
It is wrong for the right hon. Gentleman to give this kind of a nudge and a wink. We do know that the Inland Revenue is charged with the administration of the law. We should be told if it is felt, as a matter of political decision, that this kind of scholarship scheme should be subject to fiscal impositions. This is a perfectly intelligible viewpoint, although it is not one that I share. I do not know what the Patronage Secretary feels about it. I


wish that he could have been encouraged to step over the Bar and give us his views. He was obviously rather unsettling the hon. Member for Lewisham, West. I think that we are entitled to know why the Inland Revenue took this advice, and why, having let these schemes run for a long time, it has chosen to act in this way.
If we are to accept this press release, as I suppose we must, in practical terms—although this is not the right way to govern this country—let us examine it a little more closely. Perhaps the Chief Secretary can give us a view about it—

Mr. Dennis Canavan (West Stirling-shire): Get on with it.

Mr. Rees: If I am wasting the time of the House I shall be called to order, but not by the hon. Gentleman, whose interventions in these matters have been notable by their absence, thank heavens.
There are two points on which we are entitled to clarification. The release refers to the scholarships being made by reason of the parent's employment. What exactly is meant by that? If one of the qualifications for participation in the scheme is that the child should be the child of an employee, will these scholarships be said to be by reason of the parent's employment? As the Chief Secretary will recall, there is a certain amount of law on that, and he might care to give his view, for example, on the question whether Hochstrasser and Mayes would be relevant to this. We want to know, and so do a lot of people outside the House.
The press release goes on to say that the Revenue will take a benevolent view of the scheme for awarding scholarships is open to all. Does it mean "all" literally? Does it mean that there should be no restrictions at all? For instance, does this mean that a scholarship cannot be limited to members of the male sex, children under 15, or—dare I say it—children who are patrials of the United Kingdom? If there is that kind of restriction, will it encourage the Inland Revenue to impose tax on the child's parent? If this is to be a substitute for legislation, we need guidance from the Chief Secretary.
At the end of the day, I feel that this matter must be cleared up by the courts.

Mr. Canavan: It is well past the end of the day.

Mr. Rees: If the hon. Gentleman has a notable intervention to make, perhaps he will make it on his feet. We shall listen to him with great interest. I have heard him on a variety of subjects, but never on this one.

Mr. Canavan: I would rather see you on your backside.

Mr. Rees: That is the kind of intervention that leads people outside the House to wonder whether broadcasting was really worth while. It perhaps enables them to judge the hon. Gentleman in his true light, but I leave that to his own electors.
At the end of the day I think that this is a matter that should be tested by the courts; it is a matter for litigation. When we have a definitive conclusion from the courts, we may be able to consider in a more constructive light what kind of legislation is needed—whether the relief should be extended or tightened up. As things stand, I believe that this is a quite improper and impracticable way of proceeding.

Mr. Joel Barnett: I note the hon. and learned Gentleman's anger with my hon. Friend the Member for West Stirlingshire (Mr. Canavan) about his intervention. If we are concerned about what people outside think about interventions, let me tell the hon. and learned Member for Dover and Deal (Mr. Rees)—in the nicest possible way, because he knows of my affection for him—that over many days and long nights I have heard a lot of elegant rubbish from him, but rarely has it been so repetitive as tonight. I say that with the greatest regard for him, but he has repeated his questions interminably and in his customary elegant manner.

Mr. Peter Rees: What about the answers?

Mr. Barnett: I shall soon be coming to the answers. The hon. and learned Member said, in his exquisite way, that I should use my fertile and ingenious mind to defend my right hon. Friend the Secretary of State for Education and Science. Frankly, there is no need to use any fertile or ingenious mind, if I ever had one. The fact is that my right hon. Friend has made it clear that what she is concerned


with is to encourage schemes that are open to the public and not to provide benefits that are clearly benefits to the employees—and highly paid employees—of particular firms. This is what we are talking about.
If the hon. and learned Gentleman is seeking to pretend that these schemes are not means of providing benefits for highly paid employees, why was he so concerned to make the point that these schemes are brought about because of high levels of taxation? He well knows that these schemes are created deliberately and with the clear belief, as the right hon. Member for Crosby (Mr. Page) said, that they would not be taxable in the hands of the family of the employee.
Let us be clear what we are talking about. It has nothing to do with the aspirations of parents, which I fully understand, to provide a decent and proper education for their children. We are talking about whether firms are giving employees a benefit which is similar to remuneration in law. New clause 53 is designed to ensure that scholarship income awarded to a director or a higher-paid employee or a member of his family by reason of that employment should not be taxed as a benefit. It is difficult to tell, but the cost could exceed £5 million, and if the new clause were accepted we do not know how many more schemes would be introduced and how much greater the cost would be.
1.15 a.m.
The hon. and learned Member for Dover and Deal referred to what was said in another place recently in reply to Lord Boyd-Carpenter. The hon. and learned Gentleman said that he thought that there was an element of retrospection involved. I note that the hon. and learned Gentleman looks quizzical when I use the word "retrospection". I understand his difficulty. When he speaks at length, he gets carried away with his own verbosity and is never too clear what he is saying. That is the word that he used, and I am sure that that is what Hansard will say, because I heard the word and took a note of it.
There may have been some misunderstanding about that answer in another place. Let me make clear that in practice the change will not apply to awards before the date of the Inland Revenue

announcement. It will apply to awards made after that date under schemes that were in existence before then.
I was asked why the Inland Revenue sought to deal with the matter at this time. I regret that the hon. Member for Cornwall, North (Mr. Pardoe) used phrases such as "the narrow, twisted minds of some Inland Revenue officials". I would not dream of referring to some of his hon. Friends, who are now at home tucked up in bed, as having narrow, twisted minds. It is not helpful to refer in that way to officials who serve this country well in collecting revenue on behalf of the Crown.

Mr. Pardoe: People choose their occupations. They choose whether to be tax gatherers or not. I am aware that the New Testament enjoins us to love tax gatherers, but that is a part that I have never accepted and never will.

Mr. Barnett: I doubt whether that could be construed as an apology.

Mr. Pardoe: It is not.

Mr. Barnett: The hon. Member for Cornwall, North chose to be a Member of Parliament, but that does not make him a narrow-minded and twisted-minded Member. Even if we did not have a pact, I would not dream of calling him those names. I regret the name-calling in which he indulged.
The hon. Gentleman referred to the Barclays scheme. Perhaps we should both check what the scheme involves, but if it applies only to employees and their families, in my view—and I shall return to the legal aspect of it—it is a benefit and must be a benefit for the employee who has been saved the expense of meeting the fees and the income that is provided for the member of his family.
Section 375 of the Taxes Act exempts scholarship income in the hands of a person receiving full-time instruction in university, college, school or other educational establishment. There was a slight legalistic difference of opinion between the hon. and learned Member for Dover and Deal and the right hon. Member for Crosby about the interpretation of the words in that section. I have a lot of respect for the right hon. Gentleman on many matters and I agree with him that this is a matter that should be tested in


the courts. He was saying that his hon. Friend did not need to move the new clause because if the matter were tested in the courts, the money would not be taxed.
Some years ago, the Inland Revenue was advised that the exemption provided by section 375 precluded an assessment on employees as a benefit, but since then schemes have proliferated and in the last couple of years, 50 such schemes—perhaps more—have been set up.

Mr. Pardoe: She has encouraged that.

Mr. Barnett: I was brought up in a poor neighbourhood, where "she" was a derogatory expression. We are talking about my right hon. Friend the Secretary of State for Education. I would never refer to her as "she". She is a right hon. Lady, a Member of this House. She is not a "she". She was not seeking to encourage firms to provide benefits in kind untaxed for their employees—and high-paid employees and directors at that. She was not doing anything of the kind, as I am sure she would be the first to say to the House.
The schemes have proliferated. The hon. and learned Member for Dover and Deal asked why the Inland Revenue had taken further legal advice at this stage. The responsibility of the Revenue under any Government is to collect taxes that it believes that it is legally required to collect, and rightly it took legal advice in this case. That advice was that it would be right now for the Revenue to contend that there is a benefit in these schemes. If the right hon. Member for Crosby is right, and the Revenue's legal advice is wrong, he or others are perfectly at liberty to test the matter in the courts, as he himself recommended.

Mr. Graham Page: What I cannot understand is how proliferation of the schemes changed the law.

Mr. Barnett: It did not. What changed was the advice that was received. The right hon. Gentleman disagrees with that advice. He can use the law and the appeal system to see whether he is right or whether the advice given to the Revenue is right, but I make it clear that, in the case of bona fide schemes that are open to the public generally, not just to employees—by employees I mean higher-

paid employees—and where the salary and benefit combined is less than £7,500 a year, there is no question of the taxation of a benefit. It is awards to members of the family of the higher-paid, not awards to the employees themselves, that one is talking about. If the firm makes an award of a scholarship to an employee for, for example, post-graduate studies, that is not taxable unless it is so large as to qualify for remuneration rather than as scholarship income.
The hon. and learned Gentleman asked me the meaning of the Revenue press release. Where awards for fees and maintenance income in private schools and universities are made—and they are limited to employees' children—I believe that that must be the same as remunerating an employee. But again that will have to be tested in the courts. If it is not the same as remunerating an employee, it is an odd situation when the employee is being saved the expense of maintaining his child in private education or university.
Section 375 was intended to ensure that the recipient of a scholarship was not taxed, but it was never intended that it should exempt part of an employee's remuneration, and given the mushrooming of the use of what one can only consider as a device for using the provision in a way never intended, I believe that the Inland Revenue was right to take new legal advice, and that when it got the advice that it was a benefit in kind it was right to tax it.
The Revenue announced that that was what it was proceeding to do, and that it was taxing the benefit from that date.
Of course, some awards will be made on merit and, if they are open to the general public, will not be taxable. The award will be for the student and not because of the parents' employment. But if it is only to an employee, it is right that the employee should be taxed.
I am bound to say that I find the arguments that have been put forward in support of the clause wholly unacceptable. I hope that the House will reject the clause.

Question put and negatived.

Mr. Joel Barnett: I have the feeling that the House may not want to proceed much further tonight. I am sorry about that. The hon. and learned Member for


Dover and Deal (Mr. Rees) looks very tired. Therefore, I beg to move, That further consideration of the Bill be now adjourned.

Question put and agreed to.

Bill, as amended in the Committee and in the Standing Committee, to be further considered this day.

A21 (PEMBURY BYPASS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]

1.26 a.m.

Mr. Patrick Mayhew: The A21 is the main road that runs from London to Hastings. It runs through my constituency, from the outskirts of Tonbridge to the Sussex border at Flimwell, about 15 miles away. On either side of the village of Pembury it is not unusual for the traffic to build up to a distance of more than a mile in a traffic jam. It is here that the B2015 joins the A21 from Maidstone, carrying heavy traffic from there and from East Kent and Paddock Wood. Here the A21 passes through the middle of the village of Pembury, by a carriageway all of 18 feet wide.
I am grateful for the opportunity to draw attention to the project for a bypass round this the worst bottleneck to be found on the A21, of which the Under-Secretary of State, who has always courteously received me and listened to my representations over two or more years on the subject, is aware. I submit that a wholly unnecessary delay is being imposed on the construction of the bypass for Pembury.
I refer to the fact that 44 years after the bypass was first promised, up to two years are to be spent by the Department of Transport duplicating work that has already been done by the Kent county council in selecting the line of the road. It is work that can arrive only at the the result that everybody already knows and has known for years.
When the Minister introduced the Leitch report recently he said that it was the Department's role to ensure that the right road is built in the right place to the right standards and at the right time. As for the right road, the Depart-

ment knows that Kent and East Sussex, which act as a funnel for the vast majority of the United Kingdom's road-borne trade and tourism to and from the Continent, have had far less than their fair share of funds for building roads. The Department predicts growing traffic loads for the A21. Of all the trunk roads in Kent and East Sussex the A21 is the most archaic. In May 1978 the Under-Secretary of State wrote to my hon. Friend the Member for Hastings (Mr. Warren) in these terms:
We need no traffic counts to convince us that improvements are necessary.
That is right. However there are those who now suspect that the Department is perhaps preserving the A21 under some conservation programme to take its place with the Berkshire Ridgway as a road of outstanding historic interest.
Moreover, it is now proposed that the area through which the A21 runs shall be made an area of outstanding natural beauty. Yet the sidelanes and back-doubles are used by traffic trying to avoid the jams at Pembury.
There cannot be any question but that if the A21 as a whole is not to be remodelled in its entirety, which we should all like but we recognise the financial constraints, the bypass around Pembury that has been promised for 44 years is the right road to proceed with at once.
The right place: never in the history of this project, if one can describe as history the story of something that never happens, has anyone concluded that a line other than the line to the south of the village of Pembury was a practical possibility. Thus, this line has been shown on the town map for Tunbridge Wells and Southborough since 1972, and that map was nine years in the making, with prodigious consultation along the way. The Kent county council, which for years has wanted to build this bypass, long ago concluded that the line for the road should be to the south, and that was the right place for it. If one is going to the south, the actual line chooses itself.
The right standards: to put a single carriageway road round Pembury would be absurd. The great problem which the A21 presents is the queueing imposed by—to use an expression from our last debate—its narrow and twisted nature. A single carriageway constructed on a curve


would prevent any overtaking at all, so that, even on the bypass round Pembury, with a single-line carriageway, the slow vehicles would still prevent the faster ones from overtaking them. It is impossible to contemplate duplicating all these procedures of planning and construction to make a second carriageway later.
The right time: try telling Pembury that this is not the right time and one risks getting a declaration of UDI with all the traffic halted at the frontiers. Pembury has had more than enough of the dangers to life and limb presented by the traffic passing through its centre. It was the right time 44 years ago, and it has not stopped being the right time ever since.
It is against this background and these principles that the current procedures of the Department regarding the Pembury bypass fail to be judged. The Department is solemnly insisting on going through the same preliminary report procedure that would be appropriate if the Minister were suddenly to wake up one morning and say "Let us build a spaghetti junction over Canterbury cathedral."
Who is the Department asking to prepare that report, with all its investigation of alternative layouts, estimates and technical approach reports, deposit periods, exhibition periods and assessment reports? None other than the Kent county council. As a result, the Minister is not scheduled—I have the schedule here—to adopt the preferred line until a period beginning on 14th May and ending on 6th August 1979.
Let it not be supposed that all this is necessary in order to undertake at an early stage all the public consultation that will be required: not at all. I have already mentioned that the southern line is shown on the 1972 town map for Tunbridge Wells, which itself was the subject of public consultation since 1963.
A public inquiry is still scheduled to take place when? between 27th December 1982 and 3rd January 1983—into the necessary compulsory purchase orders.
Why does not the Minister come to Pembury or to Tunbridge Wells, hold a public meeting, say that he wants to void unnecessary waste of time, explain that the southern route seems to him to be the only possible one, but that he will

listen to other views then and there and invite any objectors to come to visit him in London? I can assure him of a grateful welcome if he will do that. In that way he could get on with the important part of the job.
Instead, the regional controller wrote to the Pembury parish council on 25th January this year:
The Preliminary Report is an essential and integral part of the planning processes required for any major trunk road improvement scheme. It cannot be dispensed with just because, prior to the trunking of the road, the County Council had already established the basic principles and produced a draft line. Indeed, because these principles were established many years ago, changes in traffic patterns and predicted growths may have invalidated the basic principles thus, of course, possibly affecting the conclusion that the existing line is the correct one. The Preliminary Report is therefore designed to investigate the basic principles and alternative solutions and, in the light of present conditions, to produce an efficient and economic solution. The conclusion may well be that the existing line is indeed the best solution but until the conclusions are known there is no way in which Pembury Bypass can proceed further.
He says that this will seemingly delay works by up to two years
but before the Department commits itself to expenditure in excess of £2 million it must be satisfied that the project has been propertly investigated.
What is all this about £2 million? The White Paper "Policy for Roads", published in April puts the cost at £1 million, correct to the nearest million. I do not know who is paying directly for the unnecessary work which the Kent county council is having to do. I do not know whether it is the ratepayers of Kent or the taxpayers of the United Kingdom as a whole, including those of Kent. Whoever pays, it is a waste of money and time. No one who knows the place could suppose or ever has supposed that the line can be other than to the south.
Two steps are now urgently needed. First the Minister should, perhaps after a meeting of the type that I have suggested, adopt the southern route as the preferred route, relying upon what everybody in the district has known for donkey's years. Secondly, the Minister should not muck about; he should say that this one-mile construction shall be of dual carriageway standard.
Bearing in mind that if this opportunity is lost the later construction of a dual carriageway will cost much more in delays


to traffic and ultimately higher prices, the net additional cost will be slight.
At present this project is proceeding at the pace of the traffic through Pembury on a summer Saturday morning. The duplication is having a disastrous effect upon confidence in the machinery and good will of Government. It gives no encouragement at all to those of us who urge restraint and lawful behaviour in the protests of those who consider that after 44 years, enough is enough.
With last week's example of the Penistone bypass I sincerely hope, as the sitting Member, that my constituents in Pembury do not wish that they were in the middle of a by-election.

1.38 a.m.

The Under-Secretary of State for Transport (Mr. John Horam): I am grateful to the hon. and learned Member for Royal Tunbridge Wells (Mr. Mayhew) for raising this subject, although it was perhaps unfortunate that it followed the last debate in the House. I hope that he has an opportunity to speak to his hon. and learned Friend the Member for Dover and Deal (Mr. Rees), because if he had made a shorter speech we could have come to this important subject earlier. This is more important than the matters about which the hon. and learned Member for Dover and Deal was talking.
Perhaps I can allay some of the fears and misapprehensions that have grown up in the last few months about the apparently slow progress of this road.
No one disputes that Pembury needs a bypass. That need was emphasised by our decision to make the A21 a trunk road, all the way from its junction with the A25, near Sevenoaks, down to Hastings. Thus, the responsibility for the road passed from the Kent and East Sussex county councils to my right hon. Friend the Secretary of State. The transfer took place on 1st April 1977. Trunking of the road identified it as part of the national road system linking the main centres of population to each other and to the ports.
The hon. and learned Gentleman rightly referred to the role played by Kent in taking a large part of the traffic coming to the capital from abroad. Before trunking, Kent county council in its area had done a great deal to upgrade the A21 to a standard sufficient to enable it to

carry the volumes of traffic attracted to it and to bypass some of the main centres of population. It was surely right to give priority to bypassing Sevenoaks and Tonbridge, because these larger communities obviously caused the biggest delays to traffic and suffered the worst ravages because of it.
Completion of the 13-mile length of the dual-carriageway bypasses of Sevenoaks and Tonbridge has done nothing to help Pembury and has perhaps made conditions somewhat worse there, because drivers heading towards Hastings will have become accustomed to a high speed on the bypasses and will perhaps be less tolerant of more difficult conditions through Pembury.
In addition, as the hon. and learned Gentleman pointed out, there is not one problem at Pembury, but two. The second arises from the B2105, which carries traffic from Paddock Wood to the east of Pembury through and on past the village centre. Therefore, Pembury does not need one, but two bypasses, the second being the responsibility of the Kent county council.
Quite fairly, the hon. and learned Gentleman pressed me about the speed with which the Department, having taken responsibility for the main bypass, is proceeding in this matter. He has put down Questions and written me numerous letters, as have many of his constituents. I am thinking particularly of the Pembury 2000 action group, which is very active. We have also had a petition from parishioners of Pembury.
Our aim, as we have said throughout, is to finish the road eight years from its entry into the preparation pool. It entered the pool in July 1977, so we are talking of completion seven years from now, in 1985. That assumes that there are no unforeseen difficulties, such as can occur, the most notorious of which are difficulties concerning public inquiries but which can include engineering difficulties.
Though the hon. and learned Gentleman may find it hard to believe, that timetable is a considerable improvement on the average length of time taken to complete a road from its entry into the preparation pool. It normally takes 10 years to encompass the complete construction of a road to the point where traffic is running upon it, and that applies to


small schemes—even smaller than the Pembury bypass—as well as to mammoth projects such as the spaghetti junction scheme to which the hon. and learned Gentleman referred.
That timetable indicates the importance and priority that we attach to completing the Pembury bypass. It is beating the average, on present plants, for the time taken between conception and admission to the preparation pool and completion. We have managed to cut the period by two years, partly because a certain amount of work has been done by the Kent county council.
That leads to one of the hon. and learned Gentleman's questions. He quite fairly asked whether we were duplicating the work that has been done by the council. The same officials are now engaged on the work as were engaged upon it when the council was in charge. However, it is hardly likely that those people will be going over the same work as they did previously. That would simply not be a rational use of time, especially since county councils have been constrained in their spending and have often therefore had to restrict the number of officials doing a particular job. In those circumstances they obviously will not duplicate work, and they are not doing so.
The work done by the Kent county council was of a very preliminary nature. It boiled down to getting some idea of the line that the road should take; it was not the detailed elaboration which is necessary in order fully to present a road scheme of this kind. Kent had not in any way begun the preparation of the statutory procedures which a road must complete, whether it is the responsibility of a county council or the Department.
I should like to give the hon. and learned Gentleman an idea of the work that has been going on in the past few months and will be continuing in the next few months to show him the sort of detailed preparation which needs to go into a scheme of this kind, wherever it may be.
First, we have been preparing the detailed environmental framework for consideration of the scheme, looking at the sort of country the road goes through, with preparation of the alignment of the

road, considering whether earth mounds may be necessary in certain places, considering the detailed topography of the road, and so on, in order to get a clear view of the two alternative routes and the environmental consequences of both.
That work is necessary in any case, but it is necessary also to satisfy the landscape advisory committee, which will be visiting the site this month to look at the detailed preparations and arguments which we have been putting forward. That is the first step towards getting a clear view, as Leitch says we should, of the environmental consequences of any scheme. It is an attractive area. We do not ignore that.

Mr. Mayhew: Is it not a fact that the Kent county council has been required to assess the practicality of a scheme providing for the road to go to the north of the village under the alternative layout section of the procedure? Everybody knows that that is impractical, but I understand that the county council has solemnly to sit down and assess the technical practicalities of that. Is that not so?

Mr. Horam: Indeed. The landscape advisory committee has to be satisfied that on environmental grounds—landscape grounds and aesthetic grounds—the route that we have chosen is the best. To do that it has to compare alternative routes. If at the end of the day the committee finds the northern route is the best—whatever the practicality on other grounds—it must have an opportunity to say so. Therefore, one has to satisfy those very sensible criteria—criteria which are considered to be appropriate not only by the Department but by an independent body such as the Leitch committee. We have to approach it in a sensible way, and that includes considering a northern as well as a southern route.
Second, in many cases—notorious cases such as Archway and the M3—the Department has been castigated for not having up-to-date traffic forecasts. In the Pembury case, the traffic counts justifying the road were made as long ago as 1972. Therefore, to look at the question of the right standard, to which the hon. and learned Gentleman referred—whether it should be dual-carriageway—it is necessary to look at traffic counts which are at


least of the current year when one will be considering these matters at a public inquiry as long in the future as 1982. Even then they will be four years out of date if we have a public inquiry in that year. If we stuck to the 1972 figures, they would be 10 years out of date, and objectors could well feel that that was out-of-date information. We have to have the information reasonably up to date.
There have therefore been traffic counts taking place on the road to ascertain a correct view about the standard of the road, for example, quite apart from the question whether it is absolutely necessary, which I believe it to be.
Third, we must look at an economic analysis of the road, taking into account up-to-date traffic figures. To accord a road priority over other schemes, we have to rank schemes in some sort of order to determine which should go forward first, and we can do that only by some sort of cost-benefit analysis. For that purpose one has to have up-to-date information, including the traffic counts.
All this information and analysis—environment, traffic and economic—will be ready in a few months, and we can then present the information to the public. But this work had not been done by Kent county council. It is not being duplicated by the Department. This is the necessary and inevitable next step in the preparation of the scheme, and it must be done as quickly as possible.
The hon. and learned Gentleman said that everyone knew that the southern route, was best and that we should just adopt it and cut out all the public consultation. He said that the local people had known for donkey's years that the preliminary route chosen by the county council was the right proposal. But when we finally publish the route, some people will be directly affected, some of the land will be taken. Our experience is that people will then take advantage of their right to raise objections. They may have the statutory right to raise them at the public inquiry.
It will not be sufficient for the Department to say then that it has done its calculations in a "back of the envelope" way and that the Minister has confidence in the scheme if they can prove that we have not done our calculations properly. The inspector, independently appointed by the Lord Chancellor, would say, "This

is not good enough. I will quash this proposal and we shall have to look at it again". That is the kind of trouble caused by being slipshod at this stage. If we want to get through the public inquiry rapidly, we must spend some time now making the necessary calculations.
Although 99·9 per cent. of Pembury people wanted the southern route, one or two objectors could decide they had a legitimate argument and put their case forcefully to the inquiry. I imagine that plenty of people in Pembury could bring excellent professional services to bear.

Mr. Mayhew: Surely the fallacy or that argument is that the inspector does not quash the proposal, as the Minister claimed. He makes a report to the Secretary of State and it is for him to decide whether the scheme should go ahead. In the circumstances that I have described he would have to say that it should.

Mr. Horam: I am not sure that one can prejudge the matter in that way. The Secretaries of State for Transport and the Environment together would have to consider the inspector's report and would have the final way. But they must pay attention to the inspector and if he finds that the case is sufficiently non-proven they must take that into account. They must rest on their final view but inquiries have been aborted in the past through difficulties of this kind. I must ask the hon. and learned Member to bear with that perhaps cautious but also sensible approach.
Let me give the hon. and learned Member a commitment. I understand the frustration when so many people want this bypass. If we find—we can ascertain this shortly now because of the work done between the middle of last year and now—that the northern route is not an alternative at all, we can short-circuit the procedure of public consultation. I am anxious to do so. I have said many times that I see no point in elaborate public consultation procedures when only one effective route is possible.
Nevertheless, under the procedures laid down by the hon. and learned Member's own party in 1973, we have to have some public consultation even if there is only one possible scheme. However, if only the southern route is viable, I shall make the consultation of the most skeletal kind. I will ask my officials to publish the fact


that they have come to this conclusion and invite anyone to comment on it, but conduct no further investigation.
That could save about six months and we should then probably be talking about doing that in the early part of next year. By the end of 1979 we should have it fairly well programmed. It will then take about 18 months to two years to work it up in a detailed design stage with all the engineering consequences. The inquiry should take place in 1982, with a start in 1983 and a finish in 1985. That is rather tight, with little room for slippage, but that is the sort of time we could finish in.
It would not have been done any faster by the county council. I understand from a publication by the Pembury 2000 group that the council said that it would come after the Bluebell Hill improvement south of Chatham was completed, which under Kent's current TPP will be finished in

1981–82. That means that even if the council went ahead as planned—and I doubt whether they would be able to achieve that—they could not start by 1983. With the funds available, I think that we shall be able to start this sooner than Kent could have done if it had remained a county council responsibility. At the end of the day, the people of Pembury will be getting their bypass sooner than the average time and sooner than if Kent had remained in charge, simply because the council would have lacked the financial resources—

The Question having been proposed after Ten o'clock on Tuesday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER, adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at four minutes to Two o'clock.